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The Importance of a Claims Advocate
After you learn the basics of surety bonds and are aware that you are required to pay the surety for any claims paid out, you are likely realizing the importance of choosing the right surety agency to be your partner going forward.
A good surety agent is not only a salesperson, but also your advocate in the event of a claim.
The Daunting Size of Bonding Companies
Bonding companies are often massive organizations that write a variety of insurance products. In fact, some of the largest employ over 50,000 people and produce more revenue in a given year than most countries.
Like most, you probably aren't very comfortable with such a large organization making the decision on when to cut a claim check when you are ultimately responsible to pay for it.
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Avoid Being A Number
If a claim arises, whether legitimate or not, you need a surety professional to be your voice in the claims process; a true advocate for your interests. The surety agent selling you the bond needs to be your claims advocate. They have a relationship with the bonding company and the bonding company has interest in doing business with them again in the future. As your claims advocate, your surety agent should help you every step of the way to ensure illegitimate claims are not paid and legitimate claims are resolved with reduced or no pay out whenever possible.
How To Find Your Claims Advocate
It's important to choose your agent wisely, as you are with them for better or for worse for the term of the bond. The surety industry is represented by both professional agents with a proper moral compass as well as agents only interested in making a dollar and moving on to their next sale. It's difficult for industry outsiders to spot the differences, but we have some tips so you know what to listen for.
Basic surety education - The surety product is misunderstood as insurance by the majority of the public. Any agent worth a grain of salt will take the time to ensure you have a proper understanding of suretyship and the potential claim liabilities that come with it.
Explanation of surety bond benefits - Most people question the purpose of a surety bond since they are responsible for claims. If your agent can't tell you why a surety bond is beneficial to you, then they simply don't understand the product they're selling you.
Indemnity agreement's purpose - It is an industry standard to require an indemnity agreement to be signed. Your agent should be able to explain what the agreement says in layman's terms and why it is absolutely required.
Claim avoidance discussion - The best way to avoid claims is to prevent them from occurring in the first place. Any agent that cares more about just making a quick sale will be willing to take the time to tell you what can be done to avoid claims from occurring.
Review of the bond's guarantee - There are thousands of different bond requirements in the U.S. with different bond form language on each. The bond form defines precisely what the bond is guaranteeing. Unfortunately, they are written using legal language that makes it difficult for anyone without a law degree to decipher. Worse yet, they can also refer to government statutes that require you to do research that you should not be expected to have to do. With so many bond forms in the country, you shouldn't expect your agent to have each memorized. However, if they want your business and have your best interests in mind, they should be willing to do the research legwork for you.
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It's On You To Vet Your Agent
The surety industry is a relatively small and misunderstood part of the insurance world. As a result, most state tests to become a licensed bond agent are lumped in with property and casualty insurance. The licensing tests have little to no questions related to suretyship.
To put it simply, surety agents are not properly vetted by the government's surety agent licensing process. It is on you as the consumer to ensure you work with a bond professional.