Bonds issued on construction projects are often thought to be like policies of insurance.
However, a surety bond is not an insurance policy. A bond does not "insure" payment to persons providing labor and materials on a project; nor does it "insure" that a project will be completed. Unlike insurance, coverage under surety bond is limited by the terms of the bond and in most cases, it is limited to the penal sum of the bond. There are also events which must occur or fail to occur before a surety issuing a bond for any obligation and a surety has certain defenses to claims against its bond that can eliminate the very security which otherwise would be provided by the bond. The law relating to surety and sureties is also very different from that relating to insurance.
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