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The Surety Bond Blog

15
Oct
2007

Surety Companies: How To Choose The Best For You

In this week’s article we will review what makes a good surety company, and more importantly, what makes a good surety company specifically for you. Before we get started, I should mention that pairing you up with the right bonding company is really your bond producer’s job (see: What Makes A Good Bond Producer?). The reason we are writing this article is for the people that like additional comfort that their agent is doing their job properly. So lets get started in learning why some surety companies are better than others and how subtle differences can make a big difference to your company.

A.M. Best Ratings
Bond QuoteA.M. Best is a well established credit rating system that grades the stability of surety companies. This is extremely important, as sometimes a bond will not be accepted by an obligee if the surety’s grade is too low. Typically a B+ grade or higher is accepted, but you will want to find out if the obligee has any specific requirements. Most bonding companies do not offer refunds on the first year’s premium, which would mean you purchased an expensive piece of paper!

Department of the Treasury’s Listing of Approved Sureties
The Treasury Department’s Circular 570 lists what bonding companies are certified to bond Federal projects. If you are in need of a bond to meet a government requirement, you will want to make sure the surety is on this list. Purchasing a bond from non-T-listed company could also result in a useless bond!

Turnaround Time
Not all sureties have the same turnaround time. With bonds being such a crucial part of your business, you need to make sure that your agent and the carrier have fast enough turnaround time (within reason). If you are getting everything your agent requested of you in a prompt manor, the agent and the carrier he/she set you up with should respond in an expeditious manor as well. Unfortunately, there is not much you can do to avoid this and you may need to do some trial and error. Your agent should know what markets are particularly slow or fast in their region. Keep in mind many sureties have branches and not all branches have the same turnaround time. This means you will need to mainly rely on the knowledge of your agent.

File Updates
All bonding companies are going to ask for file updates from time to time (with the exception of smaller commercial bonds). Typical file requests are updated business and personal financials at year end and sometimes mid-year for larger accounts. It is rare, but sometimes a surety will get a bit out of hand with the amount of updates requested in comparison to other carriers. If you feel they are consistently asking for too many updates, then talk to your agent about it. If your agent agrees that you are being required to send an abnormal amount of information then you may want to further discuss finding a new bond carrier. Once again, this is something where you will heavily need to lean on the knowledge of your agent, as you do not want to change sureties unnecessarily.

Rates
When it comes to commercial surety bonds, rates can vary dramatically. Contract surety bonds do not vary quite as much, but are typically larger bonds, so a small rate change can make a big difference when it comes to the premium. Talk to your agent about what carriers would consider you and what their filed rates are. Do not try to compare your situation to someone else’s, as each applicant is different and comparing rates from one to another simply does not make sense.

Indemnification Requirements
It is rare, but there are a small amount of bonding companies willing to bond companies without personal indemnification. Obviously, Fortune 500 companies are regularly written without personal or spousal indemnification, but what about the mid-sized companies? If the issue is very important to you, your agent may be able to get your bond approved without the regular surety indemnification requirements. However, you should know, it is extremely rare these days (a company must be very financially strong) and will often result in the compromise of something else (e.g. a higher bond rate).

Comments (9)

Category: Auto Dealer Bonds, Bid Bonds, Commercial Bonds, Contract Bonds, Contractor License Bonds, Court Bonds, General Bonding, Misc. Commerical Bonds, Money Transmitter Bonds, Mortgage Banker Bonds, Mortgage Broker Bonds, Performance Bonds, Subdivision Bonds, Telephone Solicitor Bonds, Title Agency Bonds, Wage & Welfare Bonds

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9 Responses

  1. Your site is very informative but does not solve my problem. My state DMV (the New Mexico MVD) requires me to get a surety bond to dispose of vehicles that someone abandoned on my property and that the county is complaining about. Without that I cannot get a title and without the title I cannot dispose of the vehicles. The problem? NO ONE can tell me the name of this bond or who can provide me with a bond of this type. I’m being told it is my insurance company, but my insurance company knows nothing about that. I’m sure this is a common problem. Could you address it?

    1. Kelly,

      The answer to that is pretty extensive and depends on who you intend on guaranteeing bonds to…Federal government, State governments, etc.

      Can you shed some more light on it?

  2. I just lately got here across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say besides that I’ve enjoyed reading. Nice weblog, I’ll keep visiting this blog very often. Little doubt this is a wonderful submit I acquired lots of information after reading good luck. Theme of blog is excellent there is nearly the whole lot to learn, Sensible post

  3. Dont use Bond Safeguard or Lexon Insurance they rip off their customers, you can get the same bonds elsewhere for cheaper with much better treatment….

      1. Great I will go with your company if need be. The office in Woodridge, IL. their underwriters talk condescending and one slammed the phone down.

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