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Questions and Answers
What is the main difference between a surety bond and insurance?
What is the main difference between a surety bond and insurance?
- Insurance policies protect the owner, while a surety agreement protects the insured
- Surety bonds are based on a set fee and assume no losses, while insurance premiums are based on the level of risk.
- Insurance covers specific losses, while a surety bond is for losses of any kind (correct)
- A surety agreement transfers risk, while insurance does not.
What happens if a loss is anticipated?
What happens if a loss is anticipated?
- The surety will still issue a bond
- The surety will not issue a bond (correct)
- The surety will issue a bond with a higher premium.
- The surety will issue a bond with a lower premium.
What does a surety do in case of a contractor's default?
What does a surety do in case of a contractor's default?
- The surety takes responsibility for the contractor's work.
- The surety seeks compensation from the owner.
- The surety seeks compensation from the contractor.
- The surety seeks compensation from a party responsible for the contractor's default. (correct)
What is the purpose of a surety bond?
What is the purpose of a surety bond?
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What is the similarity between a surety bond and a cosigner for a minor's credit purchase?
What is the similarity between a surety bond and a cosigner for a minor's credit purchase?
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How are surety premiums calculated?
How are surety premiums calculated?
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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.
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Description
Test your knowledge on the differences between surety bonds and insurance. Learn about financial responsibility, protection of parties involved, premiums, losses coverage, and more.
