Surety Insurance
Surety Insurance
In surety insurance, the insurance company guarantees to the creditor/employer, up to the amount of the surety bond issued, against the risk of the debtor failing to fulfill their obligations arising from a contract and/or law. This type of insurance functions more as a financial instrument alternative to banking products rather than traditional insurance applications. Surety insurance is particularly recognized in government tenders. It has not yet been widely accepted in the private sector. Due to its nature as a specialized financial product, it is appropriate to request it through experts in the field.
What are the features of the Surety Insurance product?
In general, surety insurance is a mechanism that compensates the losses of a third-party beneficiary on behalf of the insured. Through surety insurance, the insurance company acts as the “guarantor” of the insured and undertakes to compensate the losses suffered by the beneficiary in case the insured fails to meet their obligations. Surety insurance essentially functions like a letter of guarantee. Additionally, it provides an extra advantage to the insured by not consuming their credit limits with banks.
