Surety Bond Blog

As an agency, we focus the majority of our marketing efforts on the Internet. The web has been a great source of new business for our agency, but not for all lines of business. For instance, construction performance bonds are the #1 premium generator for our industry and yet we saw minimal increases even though we are the top ranking agency in all major search engines for the term. Commercial surety bond volume boomed from the Internet, but relatively few seemed to be searching for performance bonding to guarantee construction via the web. There are a couple of reasons why…

Geographical location - Sureties often are not interested in backing a principal that is too far away from the agent.
More complex underwriting - A contract bond line is much more involved to set up than a simple commercial bond.
People are set in their ways - Most are accustomed to getting their performance bonds from the same agency that does their insurance

Fortunately for all, the times are changing. In 2007 we saw our first year of significant growth for performance bonding from clients finding us online. Why the changes? The world moves at a faster pace now and many sureties want to keep up! Geographical locations are still important, but some forward thinking sureties allow agents to write business anywhere they are licensed. Credit-only based contract programs are expanding their capacity allowing for easier contract underwriting, in some cases more simplistic than commercial bonding. Lastly, many contractors are finding that their old insurance agent simply does not have the markets or experience necessary in the specialized field of suretyship. This forces the contractors to search for an agency that is a better match for them, which often leads them online.

It is clear that the growth of the world-wide-web is not going to stop any time soon. Therefore, it is only natural to assume that the world of online performance bonding only has room to grow!

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We decided to close our doors early yesterday around lunch. A storm of sleet and ice came through our area knocking out our Internet and later our power. Rather than stick it out, we decided to send all employees home as a safety precaution.

Another storm is expected to hit our area over the weekend. If the forecasts are accurate, our office will be open for regular hours 8:30am to 4:30pm.

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How many times have you heard of a contractor advertising that he or she is “bonded”? Do you know what that means? Most don’t, including the contractors themselves!

What does it mean to be bonded?
When a contractor states they are bonded, they are referring to a surety bond (whether they know it or not). So you may ask, what is a surety bond? A surety bond is promise of performance. It guarantees that the contractor will perform accordingly. However, you will need to find out specifically what their bond is guaranteeing. To do so, you will have to read a copy of the bond, as it will state exactly what the bond is guaranteeing (typically the terms of a license filed with a state or local municipality).

How does the bond protect the public?
So what does the bond do if the contractor does not perform properly? It protects the contractor’s clients by paying out an amount up to the total bond amount. However, most bonds do have aggregate language in them. This means that a $10,000 bond can only pay out $10,000 total. So if there are 6 people making $2,000 claims, the bond will not be able to pay all their requested amounts. The surety will then pursue the contractor for repayment of the claim amounts as well as any associated legal fees.

How do I get bonded?
Whether you are a contractor or any other profession required to post a bond, the process is the same. First, you must submit an application. Once approved, you will be required to pay your annual premium and sign an agreement (usually) that you hold the surety company harmless in the event of a claim. Once the agency has payment and a signed agreement they can issue the bond to you.

Are there any specialty programs available?
Yes there are! As of recent our agency teamed up with some of the nations biggest surety companies to create a specialty contractor license bond program. It allows us to write contractor license bonds at lower rates than our competitors for almost any situation. Whether you have low credit, no credit, bankruptcies, tax liens, bond claims, child support, etc. We can help! Start now by applying online.

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