Why Don’t More Insurance Agents Sell Surety Bonds?

Assume you are an insurance producer, and your primary focus is selling insurance products. When you get a call from a client about a surety bond, it may cause a panic. Surety bonds are so different from insurance that many insurance producers surrender, and don’t offer bonds at all. While this may work for some agencies, it may not be how you want to run your agency. Offering some surety products lead to additional sales and a stronger relationship with your clients, which will boost your client retention.

The image shows a three-way venn diagram. The top circle says Surety, the first side circle says Principal, and their intersection says Indemnity. Next to principal is a circle that says Obligee, and in the principal and obligee intersection it says Contract. Between Surety and Obligee says Gaurentee, and the intersection of all three is Bond.

This three-sided Venn diagram shows the relationship between the Surety, Principal, and Obligee.

But Why is Surety so Misunderstood?

There are a lot of misconceptions in the marketplace about bonds. This is primarily because, to sell surety bonds, the seller needs an insurance license. This gives the insurance producer and the customer the illusion that bonds are insurance products when it’s actually the opposite of insurance. A surety bond is defined as a contract among at least three parties: The obligee (the party who is the recipient of the obligation), the principal (the party who will perform the contractual obligation), and the surety company (the party who assures the obligee that the principal can perform the contract).

This post is a modified excerpt from the Little Black Bond Book by Kara Skinner. To learn more visit the Little Black Bond Book Website.