SURETY BONDS VS INSURANCE

What is the Difference Between a Surety Bond and Insurance?

A surety bond is a powerful risk management tool for small contractors, and while the terms "surety bond insurance" and "surety insurance" are commonly used, a surety bond IS NOT a form of insurance. It is actually a form of credit!

Many contractors have trouble understanding the difference between surety bonds and insurance. You are not alone and Valley Surety Insurance Agency is here to help. Every contractor in Sacramento, and anywhere else in California, needs a surety bond. We have made it our mission to help you understand these bonds and get bonded easier.

For detailed information on surety bonds, call us today at 916-567-6676.
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Why a Surety Bond IS NOT Insurance:

Why a Surety Bond IS NOT Insurance:

It is important to understand that with a surety bond, the principal, which is the contractor buying the bond, is the party assuming the risk. Surety bonds involve paying for situations in which projects do not go as intended, but they are a type of credit that is extended to the principal and the principal is expected to pay back any funds covered by a surety bond.

With insurance policies, the risk is minimized for the insurance company by the pool of policyholders that pay premiums. These premiums allow the insurance company to cover losses when an insurance claim is made. Surety companies do not expect to incur losses. They are simply providing the contractors with credit so that funds are available if a claim is made against the bond. In order to be bonded, contractors sign indemnity agreements with the surety company, agreeing to repay the surety company for any damages the surety pays out.
Surety Bonds — Experienced Worker Using Hammer Drill in Sacramento, CA

Insurance Protects the Contractor Who Pays for Insurance & Surety Bonds Protect the Contractor's Customer

Surety bonds ensure that a customer does not suffer a financial loss in the event that the contractor defaults. Because the purpose of the surety bond is to shield the customer, and because surety companies expect to be repaid, these surety companies thoroughly screen contractors before providing bonds. These companies make money by receiving premiums from contractors who are not likely to cause claims and are likely to be in a position to repay if a claim is made.

Valley Surety Insurance Agency helps contractors who have been rejected by surety companies in the past. Call 916-567-6676 to schedule an appointment and get the bond you need to promote the growth or your business.
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