{"id":1932,"date":"2024-04-11T09:00:00","date_gmt":"2024-04-11T09:00:00","guid":{"rendered":"https:\/\/teague.local\/?p=1932"},"modified":"2024-03-04T19:37:36","modified_gmt":"2024-03-04T19:37:36","slug":"surety-bonds-the-other-risk-management-tool-2","status":"publish","type":"post","link":"https:\/\/www.teagueins.com\/2024\/04\/11\/surety-bonds-the-other-risk-management-tool-2\/","title":{"rendered":"Surety Bonds: The Other Risk Management Tool"},"content":{"rendered":"\n

Surety premiums are only about one percent of property\/casualty premiums ($769.3 billion in 2022), but sureties play a critical role in our economy.<\/strong><\/h3>\n\n\n\n

According to the Surety & Fidelity Association of America (SFAA), surety contracts protect over $9 trillion in assets.

Surety bonds and insurance policies both provide financial security, but in quite different ways.

When you buy insurance, the insurer guarantees to reimburse you for a covered loss. When you buy a surety bond, it guarantees that you (the principal) will fulfill the terms of your contract or other obligation with a third party. If you fail to meet these obligations, the surety company will pay the other party (called the \u201cobligee\u201d).

The indemnity provision in a typical surety agreement grants the surety the broad legal right to recover from the indemnitor (usually the principal) whatever it pays on the principal\u2019s behalf under the related bonds, as well as those amounts for which it remains liable.<\/p>\n\n\n\n

When Do You Need Surety Bonds?<\/h4>\n\n\n\n

If your profession requires a license, the state will likely require you to have a license bond to protect your clients if you don\u2019t uphold the regulations that govern your license. Project owners often use construction or performance bonds to guarantee that a project or job will be completed according to the contract; contractors many also be required to buy bonds to guarantee they will pay workers\u2019 compensation claims. Crime bonds guarantee that a covered employee won\u2019t embezzle your funds.<\/p>\n\n\n\n

Insurance vs. Surety Bonds<\/h4>\n\n\n\n

Although insurance and surety bonds both transfer risk, they have significant differences.<\/p>\n\n\n\n