Quick tips for buying Surety Bonds
Total Cost of the Bond
The annual total cost of the surety bond to the customer is a very significant factor to look at when shopping for a bond. While this is definitely not the only element that should be considered, it is typically the first place most people look for. This should include premium rates from the surety bond companies as well as the bond agents you purchase them through. All else being equal, customers should look to buy bonds that take the least amount of their hard-earned money as possible. However, as you’ll see below, when it comes to the surety bond industry, all is else is not always equal. Bond companies as well as agencies that represent them can vary greatly.
Quality Customer Service
The level and quality of customer service provided by a bond agent is of particular importance and should not be overlooked, particularly for customers that plan on renewing their bonds. You want to look for skilled agents that can quickly turn bonds and get them to the customers that need them in timely, efficient manner.
Turnaround time is especially important for customers attempting to purchase contract bonds. The most successful agents are those that truly lookout for the best interests of their customers and work to develop lasting business relationships. Such a relationship with a trusted, knowledgeable agent will benefit both parties and can provide principals (customers) with valuable business advice.
Conduct Background Checks
While bond companies and agents will conduct financial/credit checks on you, the customer, you too have the ability to conduct background checks on prospective sureties. You can do so by looking up the company on a database known as the Federal Treasury List. All sureties are given annual ratings by a number of organizations. Based on the documents they are required to submit, the sureties are assigned a letter grade. This letter grade is updated annually, and should be easily accessible to all who would like to find it. It should be attainable from surety bond agents, because they represent the sureties to prospective customers. Additionally, customers may want to consider how much experience a prospective agency has in the industry in which their specific bond type falls under, because it can possibly expedite the process and help you get exactly what you need.
Ease of Renewal Process
Another factor that may not jump out at customers at the beginning of the surety bond purchasing process is the ease of the renewal process. It goes without saying that this should be of significant importance for customers that know they’ll need to renew their bonds in the coming years. Requirements for the renewal of a bond may vary between different companies and agencies. Customers may want to find out how often they will be required to provide updated financial statements to their agents, such as balance sheets, income statements, statements of cash flow, as well as credit reports. Requirements established in writing by sureties and agents must be met by principals in order to prevent termination of a needed surety bond.
While the aforementioned factors are not the only things to consider when shopping for a surety bond, they will definitely help steer you in the right direction, and should help customers find the right bond from the right company and agency.