What is the difference between surety insurance and a surety bond?

As we know, the Surety Bond and Surety Insurance are guarantee instruments whose purpose is to ensure compliance with the obligations established in a contract, covering the losses resulting from non-compliance.

So what is the difference between them?

Surety Insurance is an insurance contract whereby the Insurer undertakes to indemnify the Insured by way of compensation or penalty for the pecuniary damage suffered, within the limits stipulated in the said Contract, upon the occurrence of the circumstances agreed therein in relation to the breach by the contracting party of the insurance of its legal or contractual obligations.

A Surety Bond is a Contract whereby a Surety Company undertakes to the creditor (Beneficiary) to perform in the event that the Debtor (Principal) fails to do so, in accordance with the scope established in the Bond Policy. Below are some differences worth mentioning:

• A surety bond is considered an accessory surety obligation, i.e., there is a principal contract to which it is backed by. While a surety bond is the main contract and does not depend on another contract.

• A surety bond is issued by a surety company, while a surety insurance policy is issued by an insurance company authorized to operate in this line of business.

• In the surety bond, the guarantee is issued by means of a surety bond policy, while in the surety insurance, a surety bond certificate is delivered, which can be validated by means of a policy number, in both cases this procedure can be carried out electronically through the issuing company's website.

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