Insurance & LiensQuestion 1485 of 1605
Which statement best distinguishes a SURETY BOND from an INSURANCE policy?
a.A surety bond is a three-party guarantee that protects a third party (the obligee); if the surety pays a claim, it can seek reimbursement from the principal
b.Insurance always involves three parties and a right of reimbursement
c.A surety bond protects the bonded party from its own losses, like insurance
d.There is no meaningful difference between them
Explanation
A surety bond is a three-party arrangement (principal, obligee, surety) guaranteeing the principal's obligation to the obligee; the surety expects to be repaid by the principal for paid claims. Insurance is a two-party risk-transfer where the insurer absorbs the insured's loss without reimbursement.
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