Similar to how a bond works, surety insurance is a guarantee instrument whose purpose is to ensure compliance with the obligations of a contract, to ensure that they are carried out as they were established.
In the insurance sector, the term ” Bond ” means caution or prevention and refers to the guarantee or assurance that the agreement between two or more persons will be carried out as established.
The Insurance of Caution is integrated by 3 elements: the insured or beneficiary, the insurer or company that grants the policy and the policyholder and responsible for compliance. Said instrument of guarantee, works as damage insurance since in case of default, indemnifies the insured for the amount established in the policy.
5 main benefits of the Insurance of Bond:
- It provides peace of mind to individuals and corporations at the time of doing business.
- It grants security that the obligations established in a contract will be carried out.
- It guarantees the repair of the damage in case of breach with the contract.
- Avoid economic losses to the insured.
- It does not require a joint obligor for hiring, unlike a bond.
- It does not imply large economic losses, since only the net premium must be paid.
- When a claim is issued, the compensation payment will be made after 30 days.
Unlike a bond, the Surety Bond does not always require a joint and several guarantees, which makes the contracting and issuance process easier.
Being an additional security instrument, the Surety may only be issued by the Insurance and Surety Bonds, through their intermediaries.
Are you interested in learning more about this important guarantee instrument? Get in touch with our professional advisors and get all the information.