Bonds and Insurances, What’s the Difference?

Have you been told that a surety bond is the same as insurance? Or that insurance is better than a surety bond in the field of construction? There are contractors, who feel, that construction bonds are not necessary in order for their business to succeed. Unfortunately, these are often the same contractors who do not see as much business growth as bonded contractors. Public construction projects require surety bonds. The public construction sector is always looking for contractors to complete their projects. Therefore, it is a reliable industry. In recent years, many private sector construction jobs have also begun to require surety bonds.

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First, we would like to debunk the myth that bonds and insurances are the same thing. Many people assume that the terms “bonded” and “insured” are interchangeable. In the case of the contractor, an insurance policy usually refers to liability insurance or workers’ compensation. They do not protect the project owner, but rather the workers. Hearing that a contractor is bonded gives the project owner confidence that they are protected.
A surety bond is a contractual agreement between three parties: the project owner, the contractor or business and the surety bond producer. The project owner (being the homeowner or a public entity) asks for a surety bond from the contractor. The contractor contacts their surety bond producer. The surety bond producer looks over a multitude of documents and evidence. If found sufficient, the surety bond producer assures the project owner the contractor can fulfill the contractual obligations. If, by some off chance, the contractor defaults on the contract, the surety bond producer will compensate the project owner and complete the project. This is known as filing a claim. Then, the surety bond producer will seek reimbursement from the contractor.
But this is not to say that insurances are not needed. Rather a company is stronger when it uses bonds and insurances to work together. Having both speaks volume about the competency of the construction company.
Do you still have questions? Feel free to contact us, at We have decades of knowledge in the surety bond field and some of the best relationships with underwriters. We can help communicate to future clients the financial confidence and competency of your construction business.
We are an independent bond-only agency, committed to the principles of service, integrity and professionalism. We view our clients, employees and underwriters as our “business family”. We strive to offer every one of our clients unsurpassed attention and support to ensure a mutually beneficial relationship. We have a keen understanding that success for everyone is only possible through helping all of our constituents achieve their goals and objectives. A satisfied customer, employee or vendor is the best business strategy of all. Our surety bonding services help create a blueprint for success. Our principals have relationships nationwide and have earned the trust of underwriters. Because of our credibility within the underwriting community and longevity in the industry, we are able to act as powerful advocates for our clients. We have a unique, tactical process to professionally design and present a thorough financial picture with risk and financial analyses to the surety market.