FAQs on Surety Insurance
Surety insurance protects your contract partners against financial losses if your company fails to meet its contractual obligations. The insurer pays up to the agreed bond amount. However, it does not cover losses resulting from fraud or intentional misconduct.
A surety insurance policy protects your contractual partners against financial losses if your company fails to meet its contractual obligations. The insurer will cover payments up to the agreed bond amount. However, it does not cover losses resulting from fraud or intentional misconduct.
Applying for and issuing a surety bond is generally faster than obtaining a bank guarantee. After a credit assessment and approval, the insurer issues the required bond certificate.
Surety insurance is especially useful for businesses that regularly need to provide guarantees. It is essential in industries where financial security is required to back contractual performance, such as:
- Construction and trades: For performance, warranty, and contract fulfillment bonds
- Mechanical and plant engineering: To secure down payments and long-term contracts
- Service providers and suppliers: For contractual performance and payment protection
- Companies participating in tenders: For bid bonds and contract execution guarantees
- Businesses looking to preserve liquidity and credit lines: Avoiding capital tie-up
- SMEs with limited financial reserves: Gaining flexibility to grow and invest
Small and mid-sized enterprises, in particular, benefit from the flexibility and protection that surety insurance offers. It enables them to take on projects confidently—without compromising liquidity or operational capacity.
Surety insurance offers several key advantages over traditional bank guarantees:
- It does not affect your company’s credit line
- It does not require cash collateral or frozen capital
- It preserves financial flexibility for operations and investments
- Approval is often faster and less bureaucratic than with banks
- It enables efficient use of financial resources, especially for SMEs
