Hawaii Insurance License Practice Exam

Question: 1 / 400

What is the main difference between insurance and a bond?

A bond involves two people

A bond is an agreement between three parties

A bond is essentially a financial instrument that represents an agreement involving three parties: the issuer (borrower), the bondholder (lender), and a third party, typically a trustee, who represents the interests of the bondholders. This tripartite relationship is crucial in the context of bonds since it establishes the terms of repayment and oversight.

In contrast, traditional insurance involves a contract where an insurer provides coverage to an insured individual or entity, protecting against specified perils in exchange for a premium. This one-on-one contract is fundamentally different from the three-party structure of bonds.

Understanding this distinction is vital in the insurance and financial industries, as it helps professionals navigate various risk management tools and financial obligations effectively.

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Insurance covers accidents only

Insurance can be purchased by businesses only

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