Protection provided by a bond is not insurance. Coverage under an insurance policy is a two-party agreement between the insured and the insurance carrier.
A bond involves three parties: the person who pays the premium (the principal) who is bonded for an action by a surety (the insurer) for the benefit of a third party (the beneficiary).
Bonds are distinguished between Surety bonds, which guarantee the performance of a contract, and Fidelity bonds, which protect against the dishonesty of employees.
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