What is a Financially Responsible Officer Bond?
In construction, a financially responsible officer (FRO) is either the owner of the construction company or an officer of the business designated to manage company finances. In some states, the FRO is required to be licensed by a state regulatory agency. This licensing process often requires the FRO to obtain a financially responsible officer bond.
The reason a financially responsible officer bond is a necessity for some construction company officers is because they carry the significant responsibility of the business’s financial operations. The bond provides security that the FRO will act according to state and federal laws, protecting the licensing authority and the public from misuse of funds. A financially responsible officer bond provides a safety net in the event of non-payment, as a claim can be made against the bond to help cover financial losses.
What Does a Financially Responsible Officer Bond Cost?
Like other surety bonds, the total amount of a financially responsible officer bond that must be in place varies from state to state. This bond amount along with several other factors influences the price you pay for the bond. However, you do not have to pay the entire amount of the bond required. Instead, you pay a small percentage, ranging from 1 to 5%. For a $100,000 financially responsible officer bond requirement with a 2% rate, your bond premium is $2,000.
Surety agencies offering financially responsible officer bonds evaluate both your personal credit and the finances of the construction company to determine the bond rate. If credit has been an issue in the past or the construction business does not have a long track record of strong financial management, the rate you pay for your bond may be higher. This is because you pose more of a risk to the bond provider than someone with strong credit or healthy business financials.
How Do I Get a Financially Responsible Officer Bond?
The process of securing your FRO bond is simple. You can request a free quote online to start the bond application process.