Professionals and consumers alike often have a limited knowledge about how to apply for a surety bond. Even those who are required by law to purchase surety bonds can get lost in the confusing process. Although the surety bond market is a significant component of the insurance industry, little information is available to advise people on how to apply for a surety bond.
Having background knowledge of surety bonds and the associated application process will save time for both yourself and your surety provider. The more that applicants know about the surety bond application process, the easier it will be for them to apply for a surety bond. Being aware of what surety providers expect of their clients will also make the entire process more efficient and pleasant.
Determine what kind of surety bond you need.
Although surety providers do have the ability to access bond forms, you will save a great deal of time if you request the bond form yourself before you apply for a surety bond. The most efficient way to get the exact bond form you need is to contact the bond’s obligee, which is the entity requiring you to purchase the bond. Providing your surety provider with the exact bond you need is especially helpful in limiting confusion, as there are thousands of unique surety bond types available.
After you get the blank bond form from the obligee, review it to get a grasp of the terms that the surety bond will bind you to. Make sure to note the bond’s exact penal sum (or amount) because your surety provider will ask you what it is when you apply for a surety bond. Surety providers take more care and time when underwriting bonds with extended terms and/or high penal sums because they’re riskier to guarantee.
Determine how much time you have to get the surety bond.
All too often applicants wait until the week before their bond is due to apply for a surety bond. Although surety bond providers do have the ability to issue some bonds in just one business day, this should not be assumed to be normal protocol. Applicants need to understand that when surety providers issue bonds, they are executing legally binding contracts that provide protection through a financial guarantee.
When underwriting risky or intricate bonds, surety providers will take more time to review an applicant’s credentials. This means that applicants need to give surety providers enough time to do their job to the best of their ability. This includes allowing time for physical delivery, as surety providers will charge additional fees to ship surety bonds express or overnight.
Gather information that could affect your bond application.
Before you apply for a surety bond, you should make sure that all relevant personal information and business records are easily accessible. When considering you or your business as a potential client, surety providers will usually ask for:
o the exact business name as it appears on the business license
o the exact penal sum (the bond amount)
o social security numbers of all owners
o home addresses of all owners
o all relevant personal and business financial records
Surety providers will also inquire about your credit score, as it’s one of the biggest factors that will affect your surety bond cost. Your surety provider will look it up later on in the process, but having a ballpark estimate early on allows the surety to give you a more accurate cost estimate.
Find a surety provider that will offer you the best rate for your surety bond.
Those looking to apply for a surety bond have two primary providers from whom they can purchase their bonds. Insurance companies traditionally issued surety bonds because they had the monetary capacity to provide large financial guarantees. Over the past decade, a number of specialty surety agencies have emerged to offer more comprehensive bonding services to principals who need to apply for a surety bond.
Finding a surety bond provider that will offer you a competitive rate is easier than ever since most of today’s surety bond providers have strong online presences. You can apply for a surety bond online in just a couple of minutes and get a firm price quote back in just a couple of business days. Just make sure you have that crucial information at your disposal, as you’ll get a more accurate quote if you can provide the surety provider with specific information in your initial request.
Triple check all information on your application.
Surety bonds act as legally binding contracts, so government agencies do not accept bonds with technical errors or typos. While writing your bond, surety providers will use the information you included on your application, which is why it’s extremely important for you to fill out your application correctly. You must work with your surety provider to make sure that your company’s name and address are 100 percent accurate.
Your business’s name and address must appear exactly as it does on its business license. If so much as a comma is missing from your company’s name on the bond, then the government agency requiring the bond will flat out reject it due to inaccuracies. If you or the obligee finds errors on the bond after it has been executed, the process will be longer and more expensive because you will have to get a rider for the bond.
Pay for your surety bond.
Your surety provider will not legally execute your bond until your payment has been received. Surety providers typically accept credit card payments over the phone as well as checks sent through the mail. Just remember that it will take longer for you to get your surety bond if you’re sending your payment through the mail.
Although the process might seem complicated at first, being prepared will help you as you apply for a surety bond.
Kevin Kaiser is a principal for surety bond company SuretyBonds.com, educating consumers on everything related to surety bonding.