6 Questions
What is the main difference between a surety bond and insurance?
Insurance covers specific losses, while a surety bond is for losses of any kind
What happens if a loss is anticipated?
The surety will not issue a bond
What does a surety do in case of a contractor's default?
The surety seeks compensation from a party responsible for the contractor's default.
What is the purpose of a surety bond?
To assure the owner that the contractor is financially responsible
What is the similarity between a surety bond and a cosigner for a minor's credit purchase?
Both are irrevocable once issued
How are surety premiums calculated?
Based on a set fee and assume no losses.
Study Notes
- A surety bond assures the owner that the contractor is financially responsible.
- A surety bond is not the same as insurance.
- Insurance policies protect the insured, while a surety agreement protects the owner.
- Surety premiums are based on a set fee and assume no losses.
- If a loss is anticipated, the surety will not issue a bond.
- A surety can seek compensation from a party responsible for a contractor's default.
- A surety bond is for losses of any kind, while insurance covers specific losses.
- Insurance transfers risk, while a surety agreement does not.
- Once a surety bond is issued, it is irrevocable.
- A surety bond is analogous to a cosigner for a minor's credit purchase.
Test your knowledge on the differences between surety bonds and insurance. Learn about financial responsibility, protection of parties involved, premiums, losses coverage, and more.
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