Coverage that Pays Your Obligation to a Third Party
Bonds – Individuals may sometimes need a bond. For example, a trustee of an estate or a state may require a specific type of license or permit bond. This type of coverage pays your obligation to a third party if you default on what you promised to do. Because there are three parties – you (the principal), the firm receiving the promise (the obligee) and the firm backing the promise (the surety) – it is considered a surety product rather than an insurance policy. Insurance policies are between two parties, the insured and the insurance company.
The definitions above are intended for information purposes only. Actual policy terms, conditions and exclusions of the actual polices may alter the definitions provided.