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Surety Bonds

Protection provided by a bond is not insurance, it is a financial guarantee provided by the surety (the guarantor). Coverage under an insurance policy involves a two-party agreement. However, in a bond, the person who pays the premium (known as a principal) is bonded for an action by a surety for the benefit of a third party (commonly called a beneficiary). Bonds are distinguished between surety bonds, which guarantee the performance of a contract, and fidelity bonds, which protect against the dishonesty of employees.

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