Shopping for a surety bond is usually new to most of our clients. Typically, people feel very lost, as the entire process is new to them and they often don’t even know what they need. Here is a quick list to bring you up to speed on five things anyone shopping for a surety bond quote should know.
1. What is a surety bond?
Our regular clientele are required to post a surety bond in order to run their business, but they have no idea what the bond is or what it actually does. To put it simply, the bond is a guarantee of your performance. The bond form (provided by whoever is requiring the bond of you) states exactly what the bond is guaranteeing, usually a statute or contract. For more detailed information see our video tutorial, “What is a surety bond?.
2. How does a surety bond work?
A bonding company backs a bond guaranteeing your company’s performance. In return, you pay a premium, which is a percentage of the bond amount. If you fail to perform per the terms of the bond, a claim may be placed against it. If the bonding company pays out on a claim, they will then turn to you for repayment.
3. Shopping with too many agencies can be risky
Some bonding companies will actually decline an applicant for all agents if they receive the applicant from too many different agents. This doesn’t mean that you can’t apply with more than one agency, but you will have to ensure that the agents do not apply to the same carriers.
4. Take verbal quotes with a grain of salt
When shopping for anything, you want to know the cost right away. Unfortunately, one size does not fit all when it comes to surety bond rates. Without applying, the best an agent should be able to do is give you a range, not a precise quote. Agents giving you an exact rate are usually giving you the lowest possible rate, which everyone does not qualify for.
5. Give yourself enough time
Many of our clients apply for their bond weeks or even months prior to when they need it. However, some wait until the day they actually need the bond to call their agent to say they want to move forward with an approval. You should know that all bonding companies are going to require you to sign an agreement prior to allowing the agent to issue the bond. In most cases, an original agreement and payment must be sent to the agency to get the bond issued. After that, it is not reasonable to expect same day turnaround on bond issuance (1-3 business days, depending on volume is our current policy).