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some differences between surety and insurance

Although surety companies are often regulated by state insurance departments, surety bonding is different from insurance in some ways.

Insurance is a risk sharing device. It assumes that there will be losses. The expected losses are calculated by actuaries. These losses, coupled with anticipated overhead and other expenses, form the basis for the premium.

Surety is not actuarially rated as is insurance. Both insurance and surety call their fee a "premium." The surety's premium is as much a service charge as a conventional premium, which is determined on the basis of actual or anticipated losses. It is based largely on the cost of investigating the applicant and handling the transaction.

Surety is as much like banking as insurance. Bankers extend credit in the form of dollars loaned or as a commitment to loan. Every banker granting a loan fully expects to have the loan repaid. He investigates the borrower in sufficient detail to assure that such will be the case. Surety underwriters proceed in the same way.

If you want to talk about your insurance needs, give us a call at 512-476-6566.

Information provided by CNA Surety,
Sioux Falls, South Dakota 57104.
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