Surety Bonds vs. InsuranceMost good businesses out there advertise themselves as being “bonded and insured,” which can seem confusing, as most people think that bonds and insurance are the same things. Isn’t that phrase, then, redundant? The truth is that no, it’s not precisely redundant; there are certain important differences that separate a bond from other kinds of insurance.

You, for example, may have auto insurance for your vehicle, homeowner’s insurance for your house, and healthcare insurance for you. Businesses have both insurance and bonding. Let’s review some basic and important differences between surety bonds vs. insurance, and why both are important for your company and your operations.

The Basic Agreement

An insurance agreement is essentially a contract between two people: you and your insurance company. It guarantees that you will be compensated by the insurer if you suffer a loss covered by the agreement.

A bond, on the other hand, is a contract covering at least three parties. The surety company issues the agreement on behalf of the principal, who is you. This guarantees to a third party, the obligee, that you’ll complete an obligation to them, and that they can recover losses if you fail to do so.

Who Is Protected

When you take out an insurance policy, it protects you against damage and injury. Your homeowner’s insurance, for example, protects you against damage to your property and pays you a set amount if damage occurs. A surety bond, on the other hand, is an agreement you maintain to protect your clients, should you fail to uphold your duties.

In brief: insurance protects you, while a surety bond protects your client.


Both insurance and surety bonds have premiums. With an insurance policy, the premium covers your potential losses. With a surety bond, it pays for the guarantee that you will complete your duties and obligations.

Basic Assumptions

Insurance is taken out on the assumption that there will be losses that need to be covered. This could be due to a wide range of factors, but the basic idea is that at some point you’ll need to be compensated. With a surety bond, there is no expected loss — you’re supposed to fulfill your obligations, so the process of getting bonded is much more detailed.

Surety Bonds vs. Insurance Claims

Filing claims is different between the two as well. When you file an insurance claim, you are, in essence, getting money back that you (and many others all over the country) have paid in. With an insurance bond, it’s a form of credit that you have to repay.

This is the biggest, core difference between surety bonds vs. insurance — a bond is a type of credit, not a pool of free money to cover you for damages. As a business, you’ll be insured to protect your employees, your equipment, and your property against mishaps or damages. You’ll be bonded to give your clients confidence in your ability to get the job done.

Getting Help with Bonding

National Surety Services, Inc, has been helping businesses get surety bonds for over two decades, and we’re ready to help you with any problems or needs you might have. Give us a call for more information today!