Construction Insurance Vs. Surety Bond

When businesses engage you to perform professional services, such as building work, they are taking a leap of faith. They can look at your portfolio and client testimonials, but there’s no way to totally guarantee or foresee how a job will turn out.

However, having a surety bond for your construction company helps to develop confidence and gives the consumer peace of mind. The bond assures that contractors will keep their part of the bargain and that their work will be following federal, state, and local requirements.

Many individuals wrongly believe that a surety bond is a sort of insurance, but this is not the case.

Read on as we share with you the differences between construction insurance vs surety bond in this article.

About Construction Insurance

You, as the business owner, are protected by construction insurance. Your insurance provider will pay for certain lawsuits or incidents that would otherwise put your firm in financial jeopardy in exchange for the premium you pay for coverage.

The following are some examples of popular building insurance policies:

  • Commercial property insurance
  • Workers’ compensation insurance
  • General liability insurance

About Surety Bond

In businesses such as construction, a surety bond is essential to guarantee that you follow any rules, regulations, or laws that govern your industry. Surety bonds may serve as a deterrent to poor performance or dishonest behavior.

For example, if you quit your work halfway through building a house, the surety bond you acquired would compensate the homeowner for the monies needed to hire someone else to finish it.

If you are bonded (i.e., have obtained a surety bond), it communicates to consumers and any relevant regulating bodies that you are safe to do business with due to the financial security provided by the bond.

Differences between Construction Insurance and Surety Bond

Construction insurance is a legal agreement between your organization and the insurance company. When you file a claim under your insurance and it is approved, you are not required to compensate the insurer. It is entirely the insurer’s responsibility to pay.

A surety bond, on the other hand, does not have this limitation. The bond acts effectively as a line of credit. If a claim is made, the borrower (you) must pay, not the lender (the surety provider).

This is how it works:

  • The party who has been harmed submits a claim.
  • An inquiry is carried out by the surety provider.
  • If the claim is legitimate, the surety provider will pay for the initial claim fees.
  • The surety provider then pursues the principle to recoup the claim expenses.

As a result, if you are a contractor and submit an insurance claim, your insurer will pay the bill. If a surety bond claim is made, you must reimburse the insurer.

Claim What’s Rightfully Yours with Stone Claims Group

Stone Claims Group’s approach is to push the frontiers of claims investigation by applying cutting-edge investigative tools. Our public adjusters can back up their claims with a wealth of expertise and successes. Before they may join our team, our employees must have a minimum of 10 years of industry experience.

When you engage our services, you get a dedicated team of individuals and our combined talents to provide continual communication, attention to detail, and varied perspectives on how to establish your claim.


    Notes (optional): "Please feel free to address anything else (your title, number of buildings, number of stories, number of units, etc.)"