You might have heard a term surety bond a couple of times, but not many people are sure what it really means. Well, no need to fret. A surety bond is a three-party agreement between obligee, principal, and the surety company. The principal buys the bond, is responsible for honoring the terms, and reimbursing the surety for any payments made due to bond claims. The whole process plays out in different stages and is as simple as ABC. You need to apply to an approved surety agency, one which is licensed in your state, and follow this step-by-step guide on how to secure your bond.
Same Rules Apply
The first step is to submit an application. This is a straightforward procedure that usually does not take more than 5 minutes. This form involves basic information about the owners of the company. Namely, the typical application has sections like personal info, business info, and underwriting questions. Now, the underwriting part is particularly important because the insurance itself is based on the probability of losses tied to big numbers. Now, all the criteria for issuing a surety bond are dependent on the individual factors such as credit history, experience, and finances.
As for the first criterion, the situation is pretty clear. If your credit picture is looking good, you can expect to pay less money than those with shabby credit. Furthermore, experience aspect is related to your track record and reliability. Underwriters are seeking any possible signals that suggest you are not a worthy applicant. In other words, they may ask about canceled surety bonds, denied renewals, suspended or revoked licenses, as well as legal or administrative actions taken against you. At last, finances encompass security risks you might hold. They are associated with past financial performance of the owner of the company.
Seal the Deal
After all the necessary information is handed over, you have to wait for the company to come up with tailor-made quotes that refer to each individual applicant. The more quotes you get, the better, as they affect the rate available for your bond. Just bear in mind that carriers have varying underwriting rules, and prices vary from one to another. Once that is settled, you proceed to the phase of signing an indemnity agreement. It must be signed by every principal, and it states that they agree to pay back the full amount of any bond claims filed with the surety company.
After that, you may purchase the surety bond. This can be carried out online, via a simple check-out. If the cost of the bond permits it, applicants are allowed to set up a bond payment plan, which spreads the premium cost over 6 months. The only thing that is left is to submit the bond to the appropriate governing body. Usually, the copy of the bond is emailed to the authority, such as the Secretary of State, Construction Contractor Board, or some other body. Depending on the surety company, you may get a copy upon making a purchase.
The practice of companies like JW Surety Bonds has confirmed that getting a surety bond does not have to be expensive. Of course, the price tag is influenced by factors like a type of the bond and the amount of coverage you require. Consequently, the surety bond premiums most often range between 1 and 15% of the total bond amount. If you want to stay on the safe side, use online bond calculators, and view quotes before making a purchase. This gives you a chance to compare prices and reach an informed decision, taking the most competitive rates available for you.
Bound to succeed
Obtaining a surety bond is a process where you want to cover all the bases and must be prepared to answer inconvenient questions. Of course, some things are beyond your power, such as those covered by the experience criterion. In any regard, access your chances and use a reality check before jumping into this endeavor. Remember that requirements can differ drastically from state to state, so make sure to grasp them. You don’t want to just get bonded, but also to do that at the best price possible.