Where should I go to get a surety bond?
It might take some detective work to find the answer to that query. Surety bonds can be purchased from a variety of places, but what you require depends on your specific circumstances. Before you get a bond, double-check that your state requires one. Bonds are only accessible in states where they are required by law for private investigators or other professions, thus if you live in Florida but need a bond for work in California, don’t spend your time with Florida-based suppliers because it will be denied.
Your next stage will be determined by the amount of money you have set aside for the project. Surety businesses offer bonds for 25% of the total amount required—for example, if you require $50,000 in coverage, you may get a bond for $12,500. If you have the funds, this is the most cost-effective alternative because most providers offer bonds at full coverage or charge additional costs on top of the bond amount.
Once you’ve decided on your state and found a willing underwriter, sit down and calculate how much money you’ll require. Some businesses only sell in $5,000 increments; if that’s all your client can afford, they’ll have to pay that amount because these businesses don’t sell in lower amounts. Setting a budget before looking for surety bonds guarantees that everyone can discover one that they can afford and that no time is wasted looking at possibilities that will not work.
What should the amount of my surety bond be?
Unfortunately, this is one of those queries that can only be addressed by the company from which you are purchasing it—and they will most likely direct you to their website, which lists hundreds of various pricing. There are various factors that go into determining how high the price should be, including your company’s previous claims or loss history, as well as the type of service you conduct for them.
Of course, in order for a corporation to sell surety bonds, it must meet some form of the minimum requirement—the amount varies by state law, but most states set the ceiling at roughly 10% of the bond’s actual value. This means that if a bond costs $12,500, it must have at least $1,250 in coverage. If you ask, some companies may allow you to go higher, but don’t assume this is the case; if it were, they wouldn’t issue bonds in $5,000 increments.
Is your bond secured by your creditworthiness?
Some organizations may claim that your good credit will ensure your surety bond, but this isn’t the case. Surety bonds are purchased using money from the client that is placed in an interest-bearing account until a claim is made, at which point it is utilized to satisfy any genuine claims made against the company or individual being bonded.
Any money left over after covering legitimate claims is refunded when a specific amount of time has passed. The more money in the pool, the longer it can remain untouched, ensuring that your money is safe.
Is your bond valid in all states?
Every state is different, and it’s the provider’s obligation to tell you where your surety bond can be used. If they say it covers all 50 states, ask for a list of those states; if they don’t have one, take their word for it with a grain of salt.
There are plenty of companies out there that will tell you anything if they think they can make a profit off of it—if someone says something, double-check it on the corporate website or just ask for a copy. Before signing someone up for a bond, a qualified underwriter will gladly disclose this information.
What factors should I consider while selecting a surety bond?
When comparing surety bonds for sale, make sure to compare them on the same criteria. Calculate how much you’ll end up paying in the long run and determine if it’s worth it. Some firms may charge more but allow you a longer period to pay off your bond.
If you’re having problems making decisions, go away from the bond market for a while. Surety businesses often have additional features linked with their bonds that aren’t displayed on their website, so call and inquire about what they have to offer.
Look for another provider who cares enough about sales to contact clients within 24 hours after leaving multiple messages or sending numerous emails.
What effect does a surety bond have on your credit?
No, not in the way you may imagine. Surety businesses are concerned about how well you’ve handled your credit, and they’ll verify it, but it doesn’t imply they won’t sell you a bond if you have bad credit. The only thing this means is that if you had good credit and didn’t manage it well, don’t expect them to sell you a surety bond based on your prior failures.
Before choosing whether or not to offer you a bond, your surety business will ask for a lot of information. Make sure all of this information is correct because any false claims might invalidate the bond and leave you with no protection at all.