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How does a surety bond differ from liability insurance?

I'm a notary public and was informed that I was going to need a surety bond for my business license. I just don't understand how the surety bond is different from liability insurance?

Jun 27, 2012 by Bonnie from Lexington, KY in  |  Flag
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Herbert N Glass Level 18

Liability Insurance is insurance that provides protection to the insured party from claims arising from injuries or damage to other people or property.

A surety bond is a bond issued by an entity on behalf of a second party, guaranteeing that the second party will fulfill an obligation or series of obligations to a third party. In the event that the obligations are not met, the third party will recover its losses from the company that issued the bond.

Comment   |  Flag   |  Jun 27, 2012 from Franklin, MI

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While both surety bonds and liability insurance help protect consumers of your services, the role of a surety bond is to guarantee performance while liability insurance pays out for damages. In many cases those seeking a professional license are required to have a surety bond (or a minimum amount of cash or assets in lieu of the bond depending on the regulator's requirements). Liability insurance is not often a requirement of licensing though good business practice to protect your business.

Comment   |  Flag   |  Jun 27, 2012 from Amesbury, MA

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