Business Models
Umbrella Insurance


Larry Harb:

So, let’s go to bonds, alright? Bonds are not insurance. They’re sold by insurance companies, but they’re not insurance. Okay? Bonds are promissory notes. And what’s the difference? If I give you a general liability policy that’s worth a million dollars, has a million-dollar limit, and it pays out $50,000, well, you take your premium and that’s all you owe. With a bond, if you get a bond for $50,000 because a municipality wants you to have a bond, or the state of Ohio wants you to have a bond to protect the consumer, and the bonding company pays out $50,000, the bonding company is coming back to you for the $50,000. Okay? So, that’s why it’s called a promissory note, ‘cause that’s all they are. And that’s an important distinction between insurance. ‘Cause we sell them like insurance, but they don’t pay like insurance, okay? ‘Cause when they pay out, you gotta pay them back. So, keep that in mind. A bond is nothing more than a promissory note that the insurance company is saying that, if Larry does something that harms the customer and he’s got a bond posted, if we pay out whatever amount we pay out, Larry needs to pay us back.