Insurance & LiensQuestion 470 of 1632
Which statement best describes the key difference between an insurance policy and a surety bond?
a.A surety bond is a three-party agreement, while insurance is a two-party agreement
b.Insurance is required by the CSLB, while bonds are entirely optional
c.A bond pays the contractor for losses, while insurance never does
d.There is no practical difference; the terms are interchangeable
Explanation
Insurance is a two-party contract between the insurer and the insured that transfers risk of loss. A surety bond involves three parties (principal, obligee, surety) and guarantees the principal's performance or obligations; the surety can seek reimbursement from the principal for amounts it pays out.
This topic, taught in full in the CSLB Law & Business guide. CSLB Law & Business — Complete Study Guide (2026) — PDF + EPUB, $24.99 · 14-day refund →
Practice all 1632 questions free — no signup required.
Own the complete CSLB Law & Business guide — PDF + EPUB, $24.99 →
Related questions on this topic
- A contractor's workers' compensation policy is canceled and the contractor has not filed an exemption certificate. What is the consequence for the CSLB license?
- A property owner is injured when a wall built by the contractor's crew collapses on her. Which of the contractor's policies is designed to respond to this third-party bodily injury claim?
- Which type of insurance is specifically designed to cover a structure and its materials against fire, theft, and weather damage WHILE it is still under construction?
- A general contractor requires each subcontractor to provide proof that they currently carry liability and workers' compensation insurance. The document the subcontractor's insurer issues to verify this coverage is called a:
- A project owner asks to be named an "additional insured" on the general contractor's liability policy. What does this accomplish for the owner?
- A contractor's employee causes an accident while driving a company truck to a job site. Which policy is primarily intended to respond to the resulting third-party vehicle and injury claims?
Last reviewed: · editorial process
PrepPass team · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)