What is the best place to get a surety bond?
The answer to that question may take some sleuthing. There are many sources to purchase surety bonds, but what you need depends on your personal situation. The first thing you should do is confirm that your state requires a bond before getting one. Bonds are only available in states where they are required by law for private investigators or other professions, so if you live in Florida but need the bond for work done in California, don’t waste your time with Florida-based providers since it won’t be allowed there.
Your next step will depend on how much money you have available for the project. Surety companies provide bonds at 25% of the full amount needed—this means that if you need $50,000 worth of coverage, you will be able to get a bond for $12,500. If you have the money available, this is the cheapest option out there since most providers give bonds at full coverage amount or charge extra fees that are tacked on top of the bond amount.
Once you have chosen your state and found an underwriter willing to work with you, sit down and figure out exactly how much money you need. Some companies only sell in increments of $5,000—if that is all your client can afford then that is what they will have to pay since these companies don’t offer smaller amounts. Setting a budget before shopping for surety bonds ensures that everyone finds one who can afford it and no time is wasted looking into options that won’t work.
How much should my surety bond be?
Unfortunately, this is one of those questions that can only be answered by the company you are getting it from—and they will probably just send you to their website where hundreds of different prices are listed. There are several components that determine how much the price should be, including any previous claims or loss history from your business and what kind of work you do for them.
Of course, there has to be some sort of minimum requirement in order for a company to offer surety bonds—the amount varies depending on state law but states usually set the ceiling around 10% of the bond’s actual value. This means if a bond costs $12,500, it must have a minimum coverage amount of $1,250. Some companies may let you go higher if you ask, but do not assume this is the case; if it were, they probably wouldn’t offer bonds in increments of $5,000.
Is your bond backed by your credit?
Some companies may tell you that their surety bond is guaranteed by your good credit—this isn’t quite true. Surety bonds are paid for upfront with money from the client that goes into an interest-bearing account until the claim arises then it will be used to pay any legitimate claims made against the company or person getting bonded.
Any excess over what’s needed to cover legitimate claims is returned after a certain time period. The more money in the pool, the longer it can stay untouched which means you get more security for your money.
Does your bond cover you everywhere?
Every state is different and it’s the provider’s job to let you know exactly where you can use your surety bond. If they say that it covers all 50 states then ask them to send a list of those states, if they don’t have one then take their word with a grain of salt.
Plenty of companies out there will tell you anything as long as they think they can make a sale on it—if someone claims something, always double-check with the company website or simply ask for a copy. A good underwriter will be more than happy to provide this information before signing someone up for a bond.
How do I choose a surety bond?
When looking at different surety bonds for sale, be sure to compare them based on the same factors. Some companies may charge more but give you a longer time frame to pay off your bond—calculate how much you will end up paying in the long run and decide if it’s worth it.
If you are having trouble making any decisions then take some time away from comparing bonds. Surety companies usually have many other features associated with their bonds that aren’t listed on their website so pick up the phone and talk to someone about what they offer.
If your company doesn’t call back within 24 hours after leaving multiple messages or sending lots of emails, look for another provider who cares enough about sales to get in touch with customers.
Does a surety bond affect your credit?
No—at least, not in the way you may think. Surety companies are interested in how well you’ve managed your credit and they will do a check on that but it doesn’t mean that if you have bad credit then they won’t sell you a bond. The only thing it means is that if you had good credit and didn’t handle it well then don’t expect them to base their decision about selling you a surety bond on your past mistakes.
Your surety company will ask for quite a bit of information before deciding whether or not to sell you a bond—make sure this data is accurate because any false claims can invalidate the bond and leave you with no protection at all.
