bookmark_borderWhat Makes a Bond Different From a Lien?

surety bond - What's the connection between a payment bond and a foreigner

What’s the connection between a payment bond and a foreigner?

A payment bond ensures that a contractor’s or subcontractor’s employees will be paid in accordance with the terms of the contract and that all claimants’ rights will be maintained. A lien is a type of encumbrance put on the property as security for the repayment of a debt.

It’s critical to comprehend the relationship between these two concepts.

Contractors and subcontractors often agree to undertake certain tasks for general contractors in exchange for money from the main contractor. Both parties are protected by payment bonds, which require project owners or contracting agencies to compensate workers and suppliers if the general contractor fails to pay after promising payment and getting performance security (i.e., a down-payment). 

Amounts withheld from salary, plus interest and penalties, are usually included in the compensation paid under such bonds. A payment bond also ensures that the general contractor pays any materials or subcontractors that provide labor or services to the project.

What is the distinction between a claim and a foreigner?

Although the terms claim and lien are often used similarly in different circumstances, they have distinct meanings. The major distinction between a claim and a lien is that a claim is any account presented to someone for payment or satisfaction, but a lien is an encumbrance on land, generally by a security interest. 

This means that a claim is a summary of the client’s case against an opposing party, whereas a lien is a legal encumbrance on real property that serves as notice to all parties that there is a responsibility that could impact the land’s title or possession.

Examining the etymology of these two words can also help to explain the distinction between a claim and alien. Both claim and lien have their origins in Old French, which was passed down from Latin to Old English. The word “claim” originally meant “to wrongly appropriate,” “to hold as one’s own,” or “to seek assistance from another.” 

The word derives from Middle English, which is derived from Old French claim, which is derived from Late Latin clamera, which means “to yell.” Another explanation claims that the word comes from the Latin word clamare, which means ‘outcry.’ Around the mid-seventeenth century, the claim’s spelling altered to its current form.

What does it mean to have a lien?

A lien is a creditor’s legal claim against someone’s property, which might be in the form of an encumbrance or a charge.

When someone has an encumbrance on real estate, it indicates they have placed a hold on it until a financial obligation is met. If the debt is not paid, they may lose their right to keep control of the property. 

The other sort of lien that can exist is a charge, which would result in the property no longer being free and clear if payment for both claims could not be fulfilled at the same time. What you should know about each circumstance is that if such claims are made and are not paid in full upfront, the claimants may be able to foreclose on the property totally if necessary.

In construction projects, how do payment bonds work?

The payment bond is a written contract that is needed under construction contracts and is provided by the contractor as a guarantee. It stipulates that they must pay all project subcontractors and suppliers within a set number of days after obtaining final payment from the owner or developer. It also ensures that the contractor will execute the project according to the original contract’s construction code, specifications, and regulations.

A payment bond is used to cover any expenditures that subcontractors, suppliers, laborers, and employees may incur. Short-term payment bonds are used for minor construction projects or where the danger of having a large number of subcontractors involved in the project is considerable since claims are made against the contractor within a set number of days after being paid. For larger construction projects with fewer subcontractors, longer-term payment bonds are required.

The level of coverage offered by a payment bond varies depending on the contract’s cash value, but most demand that all claims be paid in full up to the entire amount on file at any point during construction. In an attachment to this form, the total final amount owed must be specified.

What is a construction lien?

Lien is a phrase used in construction projects to denote a person’s or company’s right to keep custody of assets until the project is paid for. The person or company who holds this legal privilege is known as a lienor. The title reverts to the owner once the lien is erased (see also recording).

The lienholder who keeps ownership of the property can be reimbursed by liquidating the assets without having to go after the property owner. If that’s the case, he’ll lose his legal rights, which could hurt his bargaining position when it comes to payment and other project-related issues. Lienholders may choose not to remove their liens after an agreed-upon quantity has been paid in some cases because they only agreed to accept partial payment.

To know more about surety bonds, visit Alpha Surety Bonds now!

bookmark_borderHow to Get Best Surety Bond Deals

surety bond - How do you go about securing a surety bond

How do you go about securing a surety bond?

Negotiating a surety bond is similar to negotiating any other type of contract. You must first determine how much you can spend, what options are available, where to shop for the greatest deal, and finally, what will best suit your needs.

Finding an agent or broker who “knows the ropes” should be the first step. Because of the amount of work they have to backtrack through, this process could take 1-2 weeks. They want to know if any other bonds are on file with another company. 

If this is the case, these businesses will have particular rights when it comes to marketing your band. During this step of the investigation, you’ll learn how long the company has been in operation and what industry it belongs to.

What factors go into determining the amount of a surety bond?

The amount of your surety bond will be determined by a number of criteria. These could include the following:

The field in which you’re applying. There may be a statutory or company-imposed minimum bond requirement for this industry. Your personal credit history may have an impact on the amount of bond you need. If you have bad credit, the firm may raise your bond requirement or refuse to issue a policy with you as the main to be insured at all. 

If the project you’re requesting coverage for is especially vast in scope, needs specialized work that could pose additional liability risks, or poses other unknown risks that would necessitate a higher degree of financial commitment from the insurer, higher levels of bonding may be required.

What should the amount of my surety bond be?

The amount of the bond is determined by any insurance requirements. If there is no necessity for insurance, the fee is $100 per license issued or renewed; if there is a requirement for insurance (which might vary), the fee is 10% of annual gross income.

If you only have one agent, for example, double-checking that he or she has the correct license number before sending out clients is critical to keeping your firm running efficiently. Bonds are required in several states. A surety bond is a third-party guarantee that may be required by a state licensing body or regulator to provide financial protection for consumers who have been harmed while being treated by qualified professionals.

Depending on your state, a license bond or an indemnity bond may be required. An individual agent who has been licensed by the state to solicit insurance business for your firm is covered by a license bond. It ensures that if the agent collects the money and doesn’t provide any insurance (and it isn’t because he or she died), you will be reimbursed by the firm that created the policy. 

An indemnity bond protects you from damages caused by third-party claims for physical harm or property damage as a direct result of your services… but it doesn’t cover professional mistakes and omissions liability.

What steps do I need to take to create my own surety bond?

If you are responsible for securing another person’s belongings, you may need to obtain a bond, also known as security or indemnification.

A surety bond is guaranteed by your creditworthiness, and it allows the bonding agency to ensure that your obligations are met. When you become a cosigner on someone else’s debt, for example, you might obtain this form of insurance. Without this guarantee, the borrower would be unable to satisfy their financial obligations.

Because each surety firm has its own set of qualifications, it’s critical to deal with one that’s the perfect fit for your needs. Here are some examples of common bond types:

License and Permit Bonds Court Bonds (Bail) Real Estate Bonds Fidelity Bonds (Insurance) Public Officials Bonds (Insurance) Fidelity Bonds (Insurance) Fidelity Bonds (Insurance) Fidelity Bonds (Insurance) Fidelity Bonds (Insurance) Fidelity Bonds (Insurance) Fidelity Bonds (Insurance) (Insurance)

As you can see, there are many different sorts of alliances to choose from depending on the occasion. Online resources can assist you in locating agencies that can provide surety bonds. Before receiving an estimate of the cost, you may be asked some questions about yourself, your business, and the duties associated with the sort of bond you want.

Are surety bonds paid on a yearly basis?

A surety bond is a three-party arrangement between the principal, obligee, and surety. A surety bond’s objective is to ensure that contractual obligations are met.

Depending on how large their firm is and what type of contract you’re seeking for, the application procedure can take up to six months to be authorized and effective by your intended customer. As a result, you shouldn’t begin this process until you’re positive your customer will agree to hire you as a contractor or subcontractor. Applicants should avoid purchasing a surety bond until they have been given a contract, their finance has been settled, and they know when the project will begin.

To know more about surety bonds, visit Alpha Surety Bonds now!

bookmark_borderWhat Will Happen If Your Surety Bond has Expired?

surety bond - When should my surety bond be renewed

When should my surety bond be renewed?

A surety bond is a contract between a guarantor and a contractor that entails the completion of work or the provision of a service. A monetary value for that service is agreed upon as collateral against the contractor’s possible errors or omissions while doing their services.

Only a fidelity bond is issued if a contractor is issued a performance bond but does not put up collateral. The fidelity bonds guarantee their behavior for three to five years, with a 12-month introductory period and annual renewals after that. The surety business will send you a renewal notice six months before the bond expires, giving you adequate time to determine whether or not to renew it. Your bond will automatically expire after one year if it is not paid.

Early renewal of your worker’s compensation bond guarantees that your company complies with all state rules as required by law, reducing the chance of your insurance being canceled or placed on “conditional” status. Payment of premiums on time, keeping required financial resources, accurately completing documentation, and remaining drug-free within the firm are all examples of compliance.

Is it possible to get your money back if you purchase a surety bond?

A surety bond is one of the three most typical bonds that a business owner must obtain. Commercial bonds and contract bonds are two varieties of this sort of bond, both of which are pledges or promises to perform a stipulated obligation. Several different agencies may require a commercial bond if you wish to sell goods on government property and have either an environmental impairment or worker’s compensation insurance coverage. If you don’t have this type of insurance, you’ll need to get a surety bond from your insurance company.

When people talk about an insurance agent “paying them money back for their surety bond,” they usually mean an insurance company refunding the premiums they paid for the bond, not money they would have received if the bond was canceled. You will forfeit all of your premium payments and will not receive any money back if you cancel your surety bond early.

Do surety bonds have an expiration date?

A surety bond has no expiration date. A surety bond is intended to last the duration of the contract, which was originally negotiated when the owner and contractor chose a subcontractor to work on-site. Your surety bond stays active and valid if you are still employed by your present employer and working under that contract or agreement.

Depending on how long it has been since you were last bonded, you may need to get a fresh bond if you have left that employment and taken another position with a new employer. Before purchasing another policy, check with your employer to see if they will enable you to keep your current coverage when you leave.

So, if you’re still working for the same employer under the same contract, your bond will remain in effect until one of three things happens: 1) The bond expires without being renewed; 2) You are dismissed or otherwise leave your work, or 3) Your surety firm cancels your insurance due to nonpayment of premiums.

What happens if your bond isn’t renewed?

If you’re anything like the majority of people, you’ve probably forgotten to pay your monthly fee and have missed a few payments. However, it isn’t always so straightforward: Some bonds have a lifespan of up to 20 years

Many people aren’t aware of these lengthier periods; they usually only consider when their driver’s license or passport expires. What about the rest of the licenses? Are the licenses still valid if the person has relocated out of state in the last ten years? The answer is yes, but there’s a snag.

Background: It is undeniable that we live in a digital age; every document and identity number has an expiration date that must be renewed. Unfortunately, the majority of people overlook this step, and the goods become invalid sooner than planned. All of these expiration dates tend to blur together in our fast-paced environment, making it difficult to keep track of them all.

What does a surety bond renewal entail?

A surety bond’s term varies based on its nature; it could be one year, five years, or even longer. Furthermore, some bonds require a single upfront premium payment, while others may simply require monthly payments. In most situations, however, once a premium has been paid, there are no refunds, so it’s critical to know what you’re getting into before making a purchase. 

In some cases, a person or a company may have a bond that is no longer active or has been discharged, and they would prefer to purchase a new one rather than dispose of the old one. Before applying for a new bond, the buyer must first ensure that the existing bond is paid off.

To know more about surety bonds, visit Alpha Surety Bonds now!

bookmark_borderPurchasing a Surety Bond for a New Business

surety bond - How do I go about getting a surety bond

How do I go about getting a surety bond?

A surety bond is a written pledge to pay the entire face value of a contract if one of the parties fails to fulfill his or her obligations. A bonding company, for example, provides assurance that contractors will complete tasks on time. Surety bonds come in a variety of sizes and shapes, but they all take on some risk to compensate for the shortcomings of any single person participating in a business. 

Customers or policyholders are frequently required to get surety bonds before financial institutions, such as banks and insurers, give them money or enter into commercial transactions with them, such as loan agreements or insurance contracts.

Selecting a surety company is the first step in being bonded. Supply and demand, the size and type of the job, and the creditworthiness of the contract’s principals all influence the bond’s going rate. In general, a contractor will be able to get a better rate by taking on a larger project or one with a higher risk for the surety business.

What kind of companies require surety bonds?

A surety bond is a contract between three parties that includes two responsibilities. One party (the “obligee”) requires another party (the “obligee”) to perform a task, such as keeping a contract with them. The other party, referred to as the “principal,” agrees to this duty and puts money up in the form of a “bond.” The third-party, referred to as the “surety,” acts as a guarantor for the principle, pledging to reimburse any losses suffered as a result of the main’s failure to execute their share of the contract.

Depending on their sector of business, businesses may require various forms of surety bonds. Retailers, for example, frequently require fidelity bonds or performance guarantees in order to effectively engage suppliers. Payment bonds may be required by a contractor so that they can be paid by clients when projects are completed.

Despite the fact that many people who have never needed a surety bond have heard of them, they are nonetheless an often misunderstood financial product. Here’s everything you should know about surety bonds.

What exactly is a corporate surety bond?

Businesses understand that there is a lot at stake when taking on work, thus becoming bonded usually costs a lot of money. Bonds are an additional cost to the organization, but they can benefit your company in a variety of ways. 

It safeguards you from errors that could cost your company money or worse, lead to a lawsuit. The cost will vary depending on the type of bond required for your business’s operations, and businesses must be bonded if they suffer a loss due to fraud, embezzlement, theft, misappropriation of cash, or property damage not covered by insurance.

It is rather straightforward to become bonded; however, businesses should always consult with their attorney before obtaining any type of surety bond, as particular bonds may be necessary to cover specific sorts of activity. 

After determining which bond is acceptable for the job, the corporation can begin looking for a surety bond company. There are several to pick from, and it is usually preferable for businesses to ask friends and acquaintances for recommendations rather than going with the first one they come across. All that’s left is to get bonded once you’ve discovered a company you can trust.

Is it possible to get a return on a surety bond?

If an insurance business is used to offering surety bonds, the premium is collected and deposited in the company’s general account. This means that if a claim is made, the funds collected for this transaction will be utilized to pay the guaranteed amount.

An insurer cannot avoid culpability by paying or refunding premiums if it fails to perform any or both of these obligations. The sole exception is if the parties agree to terminate their contract before either party has suffered any harm (i.e., upon mutual consent). Refundable premiums can be agreed upon throughout the negotiation process in such circumstances.

What is an example of a surety bond?

A loan arrangement between three parties is an example of a surety bond. The lender, who supplies the funds to be lent out, might be an individual, a company, or a corporation. The borrower is the second section of this contract. This is the party that, for whatever reason, requires funding. Typically, this purpose has to do with starting a business or purchasing a home. Finally, there is the surety firm, which is a third party in this connection.

A surety bond, for example, ensures that the third party will pay regardless of whether the borrower repays the lender. This is a three-party agreement that ensures one party does not take advantage of the other. It typically occurs when a person does not have enough money to borrow from a financial institution such as a bank yet requires funds for a specific cause.

To know more about surety bonds, visit Alpha Surety Bonds now!

bookmark_borderWho is Allowed to be a Surety?

surety bond - Is it possible for my father to be a surety

Is it possible for my father to be a surety?

If you wish to become a guarantor for someone else’s debt, make sure you have enough security to cover the loan. If someone does not have anything and cannot find someone else to become surety for him, there is nothing wrong with his son being surety for him as long as he has enough to cover.

It is erroneous to suggest that one of one’s family members can be a guarantee for one’s safety. Rather, the guarantee must be someone who meets the requirements for being accepted for the function of the guarantor. So it can’t be one’s father or anybody else in one’s family unless they can supply anything (in exchange) that will cover his debts till they become due when he offers himself as a guarantor/surety.

Is it possible to rely on a family member as a surety?

If the applicant has no known banking references, a known family member can act as a guarantor to begin the loan application process. This, however, is entirely at the bank’s decision.

Yes, you can use any blood family as a guarantee for your loan, although it’s preferable if he or she has an excellent credit score (700+). Not every member of your family will agree to act as a guarantor on your loan application. Because this will be perceived as a dangerous and perilous situation for them, it is preferable if you do not exert any pressure on them.

Unless there’s something going on that makes it absolutely vital for someone else to step up to guarantee a loan or mortgage, the bank may allow blood relatives or friends to serve as guarantors on your loan application. 

Even if they are willing to help, there doesn’t seem to be any reason why a family member should have to unless you are in grave financial problems with no apparent remedy. Otherwise, there isn’t much of a benefit to having someone else guarantee your loan while you’re seeking one. If your credit history and present financial situation are both in good standing, the lender shouldn’t need anything like this to approve your application.

Is it possible for sureties to be parents?

According to a recent court judgment in Pretoria, a parent who is serving as a guarantor for the payment of school fees and other financial obligations arising from the parent’s commitment to providing primary care for a kid should not be given a divorce decree.

The decision was made in response to a father’s request to have the bond he had signed earlier, which served as his sureties, revoked.

In this case, the respondent is not only one of the sureties on the surety bond, but he also pays school expenses for his young children…

Is your partner capable of being your safety net?

Any loan deal with a family member or friend might result in major implications for all parties involved if things don’t go as planned, for the reasons indicated in the previous article.

One of the issues is that, because most individuals find it difficult to come up with their half of the payment quickly and readily (especially as a deadline looms), the logical option appears to be to ask someone nearby for assistance. After all, who else would betray us so cruelly just because we require their services right now? 

This situation appears to be distinct from other instances in which friends or family have disappointed us. Somehow, a family member or a friend becomes a “surety,” or someone who, under contract law, is responsible for another’s debt. Of course, you probably don’t think about it in those terms when you establish the loan agreement because everyone involved will be cautious and thoughtful in their dealings with one another. 

Furthermore, if your spouse is assisting you in paying the tuition cost, asking him or her to sign something with you may never occur to you. After all, he/she has been there since the beginning, even when things weren’t easy.

Is your partner capable of being your safety net?

To successfully, lawfully, and validly pledge your property as a surety for another person’s obligation, you must first satisfy the following conditions:

  • The first prerequisite is that the individual who is liable must personally petition for the dispensation of his estate. To put it another way, only a person with personality has the ability to commit himself by contract. Mortgages would become exceedingly difficult if corporations could be committed without having owners or directors who had personality because these obligations could not be enforced against them if they still exist but have ceased operations.
  • Second, the person making the pledge should be the owner of the property being pledged. As a result, if the pledged property is encumbered or charged, the pledgor must first remove or eliminate the encumbrance before executing the suretyship contract.
  • Third, there must be clarity regarding the major obligation’s due and demandable amounts. The creditor should have a precise understanding of the amount owed to him by his debtor. If it isn’t definite, there will be no foundation for a mortgage action, which is merely a form of security for money borrowed. (According to Black’s Law Dictionary)
  • Fourth, the asset pledged must be real and existent; it cannot be an ideal, such as a future inheritance because something that has not yet come into being cannot have value with which to secure a debt, and so would provide no protection to creditors if they were allowed to take ownership of it.
  • Fifth, the two contracting parties must be lawfully permitted to bind themselves; thus, authority from some competent person or body, judicial or extrajudicial, is required.
  • Sixth, it must be clearly stated that if a loan is not paid on maturity, the creditor has the right to sell the pledged asset. There will be no foundation for a mortgage if he cannot do so without first going to court to determine the legitimacy or invalidity of the loan.
  • Finally, in the event of the debtor’s insolvency, the creditor should have the right to sell even before maturity. There will be no foundation for a mortgage action if, upon his insolvency, the debtor cannot properly make an arrangement with his creditors without first going to court.

To know more about surety bonds, visit Alpha Surety Bonds now!

bookmark_borderPersonal Indemnity: What Is It?

surety bond - What is a surety bond with indemnity

What is a surety bond with indemnity?

An indemnity bond, sometimes known as an insurance bond, protects the state from financial damage in the event of attorney wrongdoing. The term “indemnity bond” refers to the lawyer’s guarantee on behalf of himself and his firm to reimburse the state for any losses incurred as a result of improper activities. Indemnity bonds are contract instruments that bind both the signer and the surety company (each has its own list of licensed surety companies). They can be thought of as three-party contracts:

1) The customer

2) the lawyer, and

3) an independent posting guarantor, which might be either a surety or an insurance business.

An indemnity bond is required of every attorney (or insurance bond). The bond has three functions:

1) to ensure that every attorney has the financial means to compensate his or her clients for losses;

2) to ensure that attorneys conduct themselves in a professional manner that is both responsible and ethical.

3) to protect customers from harm caused by the negligence of other professionals. The state bar association keeps indemnity bonds on hand at all times to ensure that no one violates the rules.

Attorneys must have two types of indemnity bonds: one for claims stemming from legal malpractice, and the other for claims arising from criminal activities. If a lawyer is accused of embezzling money entrusted to him, for example, the state bar must be able to establish that such a thing is impossible if the bond is examined.

Is there a difference between a surety bond and an indemnity bond?

An indemnity bond is not the same as a surety bond. Surety bonds are guaranteed by the assets of the principal, whereas indemnity bonds are backed by the promise of the principle. Because they are frequently issued when payment cannot be made otherwise, indemnity bonds are also referred to as moral obligations.

A surety company’s mission is to take on risks that its clients may not be able or willing to take on themselves while taking on a very little risk. A client will look for a lender who can provide them with advantageous loan rates and terms. 

The client will also wish to be protected against the likelihood of future events as well as the existing situation. Keep in mind that people employ both of these strategies on a daily basis without even recognizing they are unable to meet their financial responsibilities. The surety firm protects them by taking on the risk that the client would default on their obligations if they become bankrupt.

An indemnity bond is used to protect against financial loss. When a lender provides one, they are committing to cover any costs or damages that may arise throughout the course of their transaction with the client. Indemnity bond lenders typically seek out clients with a high net worth, so there is minimal fear about finding someone who can take responsibility for potential losses. 

In contracts involving huge sums of money or property, such as building contracts or government projects, indemnity bonds are most typically employed. They can also be utilized when one party finds it impossible to make a payment, such as for medical expenditures.

What is an indemnity bond’s purpose?

An indemnity bond is a contract between two parties in which one pledges to compensate the other for any losses incurred as a result of the former’s acts.

An indemnity bond is a type of insurance that can be used in a variety of situations, but it is most usually linked with legal issues. When filing a lawsuit against another individual, for example, the defendant may be asked to pay an indemnity bond. This ensures that if the plaintiff wins the lawsuit, he or she will be compensated for any losses.

Estate settlement proceedings, such as probate court battles and family law conflicts over who should inherit a loved one’s property, may also require indemnity bonds.

Both parties can be protected by indemnity bonds. A homeowner, for example, might post a bond to get a bank loan so that he or she can build an extension to their home. The contractor causes damage throughout the construction process, which demands repairs. Before proceeding with the construction, the homeowner may request that the contractor post an indemnity bond. This ensures that if the contractor fails to properly build the addition, he or she will be responsible for its restoration.

What is a personal indemnity insurance policy?

When the maximum of the insured’s underlying general liability coverage has been reached, personal indemnity insurance can be obtained to cover claims brought against them.

An individual who has obtained a personal indemnity policy and makes a claim against that policy to fulfill a judgment against him or her is also referred to as a personal indemnity insurer.

In circumstances where a business’s general liability coverage has been depleted in the settlement of claims, personal indemnity insurance provides an additional layer of protection. It usually covers off-site responsibilities arising from personal harm or property damage caused by a poor product or service, as well as the costs of defending oneself against claims. 

Some plans can cover advertising injuries if they were caused by the insured on purpose. This can be especially useful in preventing future claims from being filed against the insured, as well as lowering their damages if they do occur. In any case, both general and personal indemnity policies are “excess” insurance, meaning they are only accessible when main insurance coverage has been exhausted.

A personal indemnity insurer is also a person who has purchased a personal indemnity policy and may make a claim against it to fulfill a judgment against them. The term “insurer” in this situation refers to the entity that issued the initial indemnity policy (or its appointed representative), not the policy’s individual customer. In order to gain coverage for a liability claim, a claimant would “not” be required to purchase their own indemnity policy; but, doing so wouldn’t hurt and might provide some additional protection not otherwise provided by your regular direct-to-consumer contract.

Is it possible for family members to act as sureties on indemnity bonds?

If the person being insured is not a family member, he or she must provide his or her own guarantee. Family members can act as each other’s guarantors. However, if you intend to marry someone who does not have insurance (as explained here), an indemnity bond must be obtained with your husband’s approval, as either you or your spouse will be required to sign as guarantor. If either side wants this relationship without knowing the other, both parties should apply together rather than separately.

As a result, family members are one of the safest guarantors since they will trust you with their lives, health, and fortune. If a member of your family wishes to act as a guarantor, he or she must be financially stable. It is not required for only the father or mother to sign as guarantor; other close relatives are welcome to do so as well. 

When it comes to joint responsibility, all joint applicants must be financially sound, because if one of them defaults on a payment, they are all responsible for the entire debt. Except for minors, who can have their guardians sign these documents on their behalf, everyone must give these documents directly by signing printed copies. No one can become your guarantor unless they are known to be financially stable.

To know more about surety bonds, visit Alpha Surety Bonds now!

bookmark_borderHow the Cost of a Surety Bond Is Determined

surety bonds - How much does a surety bond cost - exterior of a building made of glass

How much does a surety bond cost?

For small businesses, it is important to have a good credit score because that indicates that you have been in business long enough and have paid all your bills on time. Your credit score will factor into the pricing of the surety bond, but it is just one of many factors that will determine how much your surety bond costs.

The type of business you are in also plays a significant role in determining how much your surety bond costs because different types of businesses have different insurance needs. If you own a retail establishment, for example, some level of general commercial liability coverage, like product liability insurance, is required by law. If you are opening a restaurant, for instance, then worker’s compensation and liquor liability insurance may be required depending on the state where your business operates. 

The complexity of your transactions or operations also factors into how much a surety bond will cost because different types of transactions and operations have different insurance needs. For example, a contractor doing renovation work on a federal installation will require a different bond than if the same contractor was only serving as a subcontractor on the project.

The number of states where your company does business also plays into how much your surety bond costs because some states actually charge more to do business in their states. Some states charge applicants an additional fee if they are being bonded as a “foreign” company, which means that your business is located outside of the state where you are applying for surety bond coverage. 

The type of bond you are applying for also plays into how much your surety bond will cost because different bonds have different minimum liability limits. A contractor doing renovation work on a federal installation will require a higher limit than if the same contractor was only subcontracting for another company, for example. 

Is a surety bond expensive?

The short answer is “no,” which is why many small businesses decide to purchase surety bonds. Surety bonds are generally much less expensive than purchasing commercial liability insurance because you will not have to pay an insurer a premium in order for them to assume the risk of your business failing. The insurer’s primary concern during underwriting is whether or not the cost of the bond is worth it for them once they factor in how likely it is that you will fail.

Because most small business owners are at a high risk of failing, however, many insurers will charge an additional fee to ensure that your surety bond is underwritten as a “foreign” company. This means that your business must prove to the insurer why their state premium is not needed. It has nothing to do with where you are located nor does it have anything to do with any extra fees that may be incurred for working in certain states. 

There are many factors that play into how much your surety bond or insurance policy costs because different businesses need different types of coverage. Your credit score, the number of states where you do business, the type of your operation or transaction, and more all play into how much you will pay to purchase surety bond coverage.

Can I get a free estimate for my new business?

When applying for a new surety bond with us, we will provide you with an accurate quote that includes our premium rate. You can then decide whether or not to apply based on that rate. We do not provide free estimates because there are too many factors involved in determining if your company qualifies for coverage under any one bond. 

We also do not charge any fees before issuing policies so there is little reason to provide anyone with an estimated premium rate without getting their personal financial information first. For these reasons, it is best to contact us directly via phone or email so we can provide you with the exact amount of your premium via a quote.

What happens when I don’t have a surety bond in place?

When you need a surety bond, such as if your business is filing for bankruptcy or wants to expand its operation, one of the last things you want to happen is to find out that you will not be able to get bonded. This often means losing clients and shutting down your operation until you can get bonded and resume work. 

If your business fails and does not have a surety bond in place when they should have had one, they will be avoiding liability at all costs while protecting themselves from potential lawsuits. If there does happen to be a lawsuit against them then this could hurt their chances of getting any money out of the bankruptcy proceedings despite how valid their claim may actually be. 

Interested to know more about surety bonds? Check out Alpha Surety Bonds now!

 

bookmark_borderConstruction Company Do’s and Dont’s of Smart Contract Bidding

surety bond - What is a surety bond - modern building

What is a surety bond?

A surety bond is a three-party agreement, by which a principal agrees to be responsible for some obligation or activity and contracts with a third party who promises that the principal will fulfill that obligation. The third-party is called a surety.

In construction, a contractor bids on and is awarded a public works project such as building bridges or dams, and not directly from the government. The contract is awarded to the lowest bidder, but that contractor must provide a surety bond as insurance for their performance of services on this project.

Is it okay to use plug numbers in a surety bond?

No. A plug number is a fictitious bond number by which an agent of the surety company assigns a unique premium rate to each project or line of insurance without communicating with the underwriter who decided on the application of these rates. In California, it is not legal for construction contracts to include plug numbers as they are intended to deceive and defraud.

Surety companies suggest that plug numbers be used for surety bonds, but they can and will refuse to pay in the event of a claim if the contractor uses plug numbers in their bid. This is because it isn’t possible to identify the project from which the premium rate was calculated, so there is no way to determine whether all policy conditions have been met.

In lieu of plugging rates into an application, the required information must be provided so that underwriters can price a bond themselves based on factors such as scope, schedule, and location. California laws regulating construction contracts require applicants using plug numbers to obtain consent from straight line underwriting prior to issuance because these rates are deemed unfair and deceptive since they conceal actual risk profiles.

What happens if construction contractors fail to pay their subcontractors?

Construction contract bonds are required in order to protect the public works project, which is ultimately funded by taxpayers. These contracts can be terminated if any one of the parties defaults on payment. The only party that binds the agreement is the surety company so it is very important for them to get paid before anyone else. 

If they do not get paid, they will often terminate or not renew bond agreements with their insureds. This means that if an error was made on your part during bidding you could be stuck paying legal fees and damages while unable to obtain another bid for work because of your lack of a security bond.

What happens if a contractor has multiple jobs? Can they use one surety bond for all jobs?

When using a surety bond to bid on multiple jobs the contractor will only be able to rely on one bond per construction project. The reason is that all of these contracts are separate and specific by nature, regardless of whether they are funded by the same entity or not. For example, if the contractor is awarded more than one public works contract in California by different governmental agencies while relying on one surety bond, they must purchase separate bonds for each job regardless of whether it’s within the same town or not. 

What does “reimbursement” mean?

Reimbursement means that when an error is made during bidding proceedings then the underwriter has agreed to reimburse you for any losses incurred due to the lack of a bond. This is usually required by law and will be either in the contract or bid documents.

The surety company you’re working with may require that you purchase separate bonds for each public work project. They factor in the risk of making an incorrect decision, which can include both financial and legal consequences, and the price accordingly. 

You should make an inquiry about your specific situation, but if bidding on multiple jobs without a bond you could still be signing up for reimbursement costs as well as court costs and damages that you’ll have to pay if there’s ever a default. 

What type of insurance is necessary when self-performing construction?

If a construction company or individual subcontractor is going to perform any of the work on a job site, they must have general liability insurance. This policy applies even if the subcontractor doesn’t have workers’ compensation insurance. 

The policy must be written as primary and non-contributing with the project owner so that it doesn’t matter who’s at fault if someone gets injured — which can happen under certain circumstances no matter how much caution is used by those involved.

 

Post-performance bonds protect public works projects from financial damage due to errors that were made throughout the bidding process. In order for this type of bond to be issued, the contractor must submit along with their bid detailing all aspects of their proposed project to the public agency that will be overseeing the construction. If a discrepancy is found, then it should be brought to the contractor’s attention by your surety company as soon as possible.

 

In order for a bid to accurately present an accurate estimate of cost, all relevant information must be provided before bidding begins. In some cases, you may require more specific data from your underwriter in order to accurately price your job based on any unforeseen conditions or requirements. Some examples might include design drawings, location maps, material specifications, and any special requirements from governmental agencies prior to beginning work.

Interested to know more about surety bonds? Check out Alpha Surety Bonds now!

bookmark_borderWhat to Look for in a Commercial Surety Bond Form

surety bond - What is a commercial surety bond - modern office

What is a commercial surety bond?

A commercial surety bond is a contract between a company and another party. The contractor provides the required security against the failure of their contractual duties, generally in the form of a payment or performance bond.  These bonds can be used to encourage people to do business with you by protecting them from financial loss should you fail to complete your tasks.

Commercial surety bonds are most often used in the construction industry, but they can also be required for subcontractors involved with federal contracts. The following are just some instances where a contractor may need to procure a bond:  government projects, sale or lease of real estate, contract performance, small business contracts/agreements, and licensing.

When purchasing a commercial surety bond there are several factors you should consider before making your decision including underwriting requirements, type of contract/undertaking being bonded, indemnity amounts, premium rates, agency relationships, and financial strength ratings. Make certain you review all relevant information prior to making a decision and compare several different companies before committing. 

What types of commercial surety bonds are there?

There are three basic types of commercial surety bonds:  performance, payment, and maintenance. These different kinds of contracts require specific bonds that vary based on the nature of the work being done or services being rendered. 

A performance bond ensures that you will complete your contractual obligations while a payment bond guarantees that you will be paid for the work you have completed. A maintenance bond is similar to a performance bond, however, it’s typically used in relation to smaller contracts and ensures that both parties live up to their contractual agreements.

You can never predict exactly what will happen in your business so it’s important to prepare accordingly. Implementing a strong commercial surety bond is one of the best ways to protect yourself from financial losses as well as other legal obligations that may arise. Take the time to research these different agreements and choose a reputable agency that you fully trust with all relevant information before making a final decision.

How much does a commercial surety bond cost?

Premium rates for these different types of bonds can range from 1% – 30% depending on the type of contract, amount of the bond, and financial strength ratings. 

The premium rates can also depend upon whether you’re applying for individual or multiple bonds under one application. Compare several companies to find the best deal possible and make certain you fully understand all relevant obligations before signing your commercial surety bond agreement. 

What are the underwriting requirements for commercial surety bonds?

The underwriting process is similar to applying for a loan and the guidelines vary from one agency to another. When purchasing your bond make certain you thoroughly review all of these requirements before submitting your application as they can vary depending upon the nature of your contract as well as the insurance company. These requirements usually include: 

  • Identity verification (i.e. SSN, DOB)
  • Most recent personal and business financial statements
  • Business history and composition (i.e. number of employees, amount of revenue/sales, etc.)
  • Personal credit score and FICO score

Other factors can also affect your eligibility such as or tax liens so be sure to research and understand all relevant underwriting criteria to ensure you qualify.

It’s important to work with experienced professionals who can help guide you through this process so you understand all of the necessary details including what is required by law in your state. 

What is the process for obtaining a commercial surety bond?

The procurement of commercial surety bonds can vary depending on the company you’re working with and your specific requirements. Generally, there are four different steps involved:  application, underwriting review/approval, bond issuance, and payment of premium. Your chosen agency will guide you through this process making it as easy and hassle-free as possible so you can secure the relevant agreement in a timely manner. 

Unfortunately, there are instances where agencies fail to meet their contractual obligations and have to close their doors. If the bond you’re working with is a performance bond and they failed to perform on your contract it’s important that you take action within 60 days of the date of default to file a claim in court. Many people who worked with this company may be affected by this closure so it’s recommended that you seek legal counsel if you lost money because of this incident. 

If you’ve lost track of your commercial surety bond agency and they have gone out of business, it’s important that you find a new provider as soon as possible. The company should work with you to help transition all relevant agreements so you’re not negatively impacted by the closure in any way. Be certain to research numerous different companies before moving forward and don’t commit to anything without fully understanding all requirements.  

Interested to know more about surety bonds? Check out Alpha Surety Bonds now!

bookmark_borderChoosing a Bond Producer for the Long Run

surety bond - What makes a good surety bond producer - modern living room in green motif

What makes a good surety bond producer? 

For new companies that are just starting to bond, it’s easy to get into a routine of thinking that your insurance agent or your accountant – or even the guy who wrote the bonds last time – is good enough. But when it comes right down to it, what you need is someone who knows how and will help you:

  • Understand the bonding process and be able to anticipate your needs, including:
  • Be responsive and not forget you’re a customer when things get busy.
  • Give you the best coverage for the lowest rates – because that’s what they do all day long!
  • Put together an action plan that will get you bonded, keep you bonded, and out of trouble.
  • Teach you how to handle bonds so that they are easy for you to obtain when changes – both good and bad – occur in your business.

What should I look for in a surety bond producer?

The surety bond business is made up of good people who do all kinds of different jobs. There are specialists in construction, transportation equipment, labor, and service contracts. 

There are small companies with only one or two producers – usually in a workmanlike office in an industrial area or strip mall – that have been around for years doing this same job for a lot of different customers. Then there are big companies with multiple offices and dozens of producers, some with pretty glitzy (and expensive) offices in the heart of downtown.

While all of this is not necessarily bad (some of it might be great), you need to ask hard questions about the level of service that each producer can provide.

If you’re just getting started and you need an office that will bring your bonds to where your business is, then a small company might be right for you. On the other hand, if you want an experienced player who has their own marketing people and can sell on a national or even international basis, then one of the big guys might be better.

Who should I call, a surety bond broker or a surety bond agent?

When you start calling around to talk about insurance and bonding, you will probably find that many of the people you talk to are really brokers – they charge commissions on whatever business they send your way. But what happens if you have a problem later on? Are you stuck with this broker, even if they can’t help you? 

If you want a surety bond agent who will have your back when the going gets tough – and has been doing it for years – then you need to ask for one!

Asking for an agent will probably cost more, but it’s well worth it. After all, you wouldn’t buy a car without going to a dealership where they have cars in stock and mechanics on the premises. You would probably want to go to an established business that knows how to sell cars and fix them when they’re broken – not just offer advice over the phone or a free place for you to do it yourself.

With insurance and bonding, you want the same thing – a place where they know their business and will help you do yours.

How will I know if I’m talking to a legit surety bond producer?

There’s a lot to this business and there are some real rules and regulations that producers have to follow. But really, the best way to tell if you’re dealing with an honest person who knows their stuff is by asking them questions so they can prove it.

For example:

  • What licensing do you have? (Any insurance producer who is going to handle surety bonds needs at least one license – a state insurance license.)
  • What type of business have you been doing? (If they have been in the industry long enough to have handled your kind of bonding business before, then they can work for you now. They will know what’s needed and what paperwork you will need to provide.)
  • What kind of business are your customers? (They should be able to tell you the type of business they typically bond to – construction, trucking, cleaning companies, etc.)
  • How much money do I need to get bonded? (You probably won’t go very far with someone who is only willing to write a bond for a couple of thousand dollars. They should be able to give you a range to work with, from several thousand to hundreds of thousands.)

If they can’t answer these questions in detail, then move on. There are good people out there and, if you keep looking, you’ll find them.

How do I find a surety bond agent who understands what I want to do?

The first thing you have to know is that insurance and bonding are heavily regulated businesses. In fact, the surety bond business has been around a long time – it started with sea captains carrying letters of credit for their sailors before banks were doing it. 

In most places, there are rules and regulations about how you have to get bonded – every business has different liabilities and there is a good chance that your business might not qualify for an industrial surety bond the local agent knows all about.

In this case, it can be time to find someone who specializes in commercial bonding. Call some of the big providers and ask them if they have someone who works with business owners. Ask them if these people are willing to do things like give you a free quote even if you can’t afford their service at the moment.

If they aren’t, then keep looking. You want someone who specializes in working with business owners and understands that not every owner has the cash sitting around to get bonded all at once.

Interested to know more about surety bonds? Check out Alpha Surety Bonds now!