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Frequently the terms bonded and insured will be used in an interchangeable way. While surety bonds and insurance policies have similar qualities and functions, they are different in significant ways.

See the sections below for an explanation of the difference between surety bonds and insurance, how each of them works, and how their cost is determined!

What is the difference between being bonded and insured?

Surety bonds are agreements between three parties:

  • The bond obligee (the party that requests the bond)
  • The bond principal (the party that must obtain the bond; e.g. contractors, auto dealers, freight brokers, etc.)
  • The surety company (the party that issues the bond and backs it financially)

The bond agreement is issued by the surety as a form of guarantee that the principal will comply with the conditions stated in the agreement. In other words, the surety vouches for the principal in exchange for a particular cost or premium. If the principal violates these conditions and harms the obligee, the latter may file a claim against the bond to request compensation.

Insurance policies are agreements between two parties:

  • The insurer who issues the policy
  • The insured (or policyholder) who is protected by the policy

By obtaining a policy, the insured wants to protect him or herself, and not a third party, from various risks and losses.

For a more detailed explanation of what surety bonds are and how they work, see our ‘What is a surety bond’ guide.

Who assumes the risk with surety bonds and with insurance?

The main difference between surety bonds and insurance is how risk is dealt with.

Surety Bonds

With surety bonds, the risk remains with the principal, and the protection is for the obligee(s). In other words, surety companies do not assume liability for the violation of bond agreements on behalf of bond principals.

If a bond agreement is violated and a claim is filed against the bond, the surety may initially extend compensation to claimants. Ultimately though, the bond principal must repay the surety in full for any compensation it has extended.

This is why surety bonds are frequently compared to a line of credit which must be repaid if it is made use of. If no claims are made against a bond, then the only cost a principal has is the premium that they pay to get bonded.


With insurance policies, the risk is transferred from the individual or company to the insurance company in exchange for an insurance premium.

If an insured complies with the conditions of their insurance and makes regular premium payments, then the insurance company will assume the costs of a claim when it occurs. Insurance companies operate on the assumption that a certain number of claims will be paid out.

What’s the cost of a surety bond vs. insurance?

The cost of a surety bond and the cost of an insurance policy are formed in different ways, due to their different purposes.

Your bond cost, also known as a bond premium, is equal to a percentage of the full amount of the bond you are required to obtain. This percentage is determined by the surety on the basis of your personal credit score as well as other factors such as your financial statements and assets.

For a bond company, the higher your credit score is, and the better your overall financials, the more reliable you are as an applicant. Bond rates vary somewhat between the different bond types but in general applicants with high credit scores are offered rates in the range of 1%-5% of their bond amount. Applicants with lower scores are offered rates upward of 5% up to 15%.

The cost of your insurance policy is instead determined by the risk that the insurance company will assume in providing you with the policy. Depending on the size of the risk as well as its likelihood, the insurer will request a particular premium from you.

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If you have any further questions, you can also call us at 866.450.3412 to speak to one of our surety bond experts.

For more information on the bonding process, and surety bond requirements, see our how to get bonded page.

About us:
Bryant Surety Bonds, Inc. is a surety bond agency based in Pennsylvania. Licensed in all 50 states and with access to over 20 T-listed, A-Rated bonding companies, we have the contacts, expertise, and top service to provide you with a hassle-free experience, all while offering competitive rates for your surety bond.

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