Bonds and insurance both transfer risk and differ in structure, pricing and consequence.

Parties. Insurance is a two-party contract between insurer and insured. Suretyship is three-party — the principal, the obligee who receives the benefit, and the surety.

Indemnity. A surety that pays is entitled to indemnity from the principal and from its owners under a general indemnity agreement signed at the outset. Insurance carries no such right against the insured. This is the central practical difference: a bond claim becomes the principal’s personal liability.

Underwriting. Surety underwrites the principal’s capacity to perform — character, capital and capacity — expecting no losses. Insurance underwrites expected losses and prices them.

Premium. A fee for the extension of credit rather than a pooled risk premium.

Types. Performance and payment bonds on construction; license and permit bonds required by regulators; court bonds including supersedeas, injunction and fiduciary bonds; and commercial bonds securing obligations.

Claims. Made by the obligee, investigated by the surety with the principal’s participation, and defended by the surety with defenses of the principal available.

Collateral. Suretiess frequently demand collateral on a claim, under the indemnity agreement, before any liability is determined.