What kind of insurance does a surety bond resemble?

Surety bonds are often compared to malpractice insurance because both serve as a form of protection against failure to fulfill obligations. In the context of surety bonds, they ensure that one party (the principal) can be held accountable for a defined commitment, such as completing a project or adhering to laws and regulations. If the principal fails to meet these obligations, the surety (the entity that provides the bond) will compensate the affected party.

Malpractice insurance is designed to protect professionals from claims of negligence or wrongdoing in the course of their professional duties, much like how a surety bond protects against the failure to meet contractual or statutory obligations. This shared trait of offering a financial guarantee in situations where one party may default highlights the similarity between surety bonds and malpractice insurance.

In contrast, life, health, and property insurance cover different risks and are not based on a third party depending on the fulfillment of obligations but rather on health, asset protection, or life events. Therefore, recognizing the bonding responsibility and their protective nature explains why the comparison to malpractice insurance is most apt.