Florida Insurance Licensing Practice Exam

The Surety attempts to avoid default by investigating the principal with regard to:

1. Character

2. Capability

3. Collateral

4. All of the above

The correct answer is: All of the above

The surety plays a crucial role in protecting the interests of the obligee (the person or entity for whom the bond is being issued) against possible default by the principal (the party who is required to fulfill the bond's obligations). In order to avoid default, the surety must thoroughly assess and investigate the principal's reputation and reliability (character), their ability to fulfill the bond's requirements (capability), and any assets they may have to cover the bond's obligations in case of default (collateral). Therefore, the correct answer here is "All of the above", as all three factors are important for the surety to consider in order to mitigate the risk of default. Choosing only one of these options would not provide a comprehensive risk evaluation.