Insurance & LiensQuestion 1514 of 1605
Which statement about surety bonds is TRUE?
a.The principal is the party protected by the bond
b.A bond is a two-party contract
c.The surety expects to absorb losses without any repayment, like an insurer
d.The surety generally has a right of indemnity to recover from the principal amounts it pays on valid claims
Explanation
A surety that pays a valid claim generally has a right of indemnity/subrogation to recover from the principal (and any indemnitors). This three-party structure and reimbursement right distinguish suretyship from insurance, where the insurer absorbs the loss.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)