Growing your insurance business with surety bonds

Posted by Rick on Mar 17, 2010

How can an insurance agency expand their business in this economic climate?

The answer is diversification. If you’re a insurance agent that only writes personal auto and homeowners your need to change it and start writing commercial insurance. A good way to get into writing commercial insurance would be writing surety bonds. If you have never heard of  surety bonds, a surety bond provides consumer protection as a condition to granting licenses related to ” Motor vehicles “Mortgage Brokers Contracting services and other professional regulated licenses. Each State has its own surety bond amount as well as Bond form. I know it doesn’t really sound like a form of insurance, but it is. You can only sell surety bonds if you have an insurance license.

How to avoid being ripped off by phony contractors

Posted by on Aug 10, 2009,0,762433.story

From the Los Angeles Times

First and foremost, never hire someone whose office is the cab of a truck and who knocks on your door without being invited.

By Lew Sichelman

August 9, 2009

Reporting from Washington — The arrest recently of a group of “woodchucks” by Fairfax County, Va., police is just one example of why homeowners nationwide should use caution when hiring people to do odd jobs around their properties.

Woodchucks are so named in this part of the country because they scour neighborhoods offering tree and lawn services. Also known as gypsy contractors, they often charge outrageously high fees to do the work, if they do any work at all.

In the Virginia case, a dozen individuals have been charged with obtaining money under false pretenses. Police allege that as a group, they stole tens of thousands of dollars from an elderly woman by claiming to make repairs to her home that they never actually performed.

Although the woman in this case probably will never see her money again, at least the authorities were able to apprehend the suspects. Usually, by the time anyone is the wiser, bogus contractors have moved on to fleece another mark in the next town.

Spurious contractors often prey on the elderly. In Omaha, for example, an outfit working out of a pickup truck and going door to door this year conned an 85-year-old woman out of more than $20,000 before she called the Nebraska Better Business Bureau.

The bureau sent a technical advisor to evaluate the work and found the value of it to be only $300. And that value would have applied only “if it had been done properly, but it had not,” bureau President James Hegarty said.

The easiest way to keep from being taken is to follow some cardinal rules for hiring a contractor. First and foremost, never hire someone whose “office” is the cab of a truck and who knocks on your door without being invited. “Never let anyone you don’t know into your home,” Hegarty warned.

Rule No 2: Beware the sweet talk. “Door-to-door con artists are usually charming and friendly,” the Nebraska consumer watchdog said. “They are successful because they appear so trusting. For this reason, we encourage consumers to do their homework before contracting with any business.”

Never be rushed into making a decision, obtain estimates in writing, check references, find out whether any complaints have been made against the people you are considering and verify that the contractor has the necessary licenses and is bonded and insured.

In California, contractors cannot ask for deposits of more than 10% of the total cost of the job or $1,000 — whichever is less — unless the contractor has a special bond. Any contractor working a job worth $500 or more must be licensed in California. Ask to see a contractor’s “pocket license” and check the number with the Contractors State License Board at, or call (800) 321-2752.

Another way to protect yourself is to be aware of common bogus ploys designed to separate you from your money.

One ruse that was popular a few years ago played on owners’ fears that their homes might be contaminated by carcinogenic radon gas. Shysters would knock on doors offering a free test. Then they would collect a scoop of air using a jug or jar and take the sample back to their trucks to run some tests.

Of course, the results were positive. Then they would ask for thousands of dollars to rectify a problem that didn’t exist by digging up a floor or making some other unnecessary or useless repair.

In a similar vein, eight bogus chimney-cleaning companies were prosecuted a few years back by Suffolk County, N.Y., authorities for using scare tactics concerning nonexistent carbon monoxide leaks. They were nabbed when the county Office of Consumer Affairs set up a sting house.

Whatever the ploy, the owner is so thankful the situation has been uncovered — or so worried that it must be fixed right away — that he hires the phony contractor on the spot.

You would think folks would be a little more suspicious, but these rogues “have a way with people,” said Kay Robinson, president of the Better Business Bureau of Central East Texas. “We make ourselves willing victims.”

To avoid these and other tricks:

* Beware of door-to-door salesmen who approach you first. Most legitimate contractors have enough work from recommendations and advertising that they don’t need to bang on doors.

* Be careful if you can’t get a straight answer to your question or fail to get an answer at all. Ditto if the contractor won’t accept a check or wants the check made out to him instead of his company.

* If the contractor drives a vehicle licensed out of state, it’s almost a sure bet trouble lies ahead. You need to be able to verify his name and the name of his company, his address and telephone number. Deal with local people, not the ones who come through town.

* Don’t be pushed into quick decisions. Come-ons like “we’re in the neighborhood only this week” or “our prices are good for only two days” are just that, come-ons. Good contractors don’t cut special deals; they don’t need to. They don’t offer discounts if you promise to recommend them to your friends and neighbors either.

* Ask for references, but get the names of the contractor’s last three customers, not those of his three favorites. And make sure that you call and ask lots of questions.

* Verify licenses with the local building inspector’s office and insurance coverage with the contractor’s carrier. Call your Better Business Bureau and consumer agency to find what, if any, complaints have been made against the contractor and how the gripes have been resolved.

* Get everything in writing and take time to review it. Every verbal promise should be included in the contract, as should the three-day notice of cancellation required by federal law for contracts signed in the home.

* Never sign a blank contract. Every space should be filled in or crossed out.

* Don’t agree to allow the contractor to arrange financing until you check out other funding sources. You could be agreeing to pay rates and fees that are exorbitant. Or worse, you could be placing your entire house at risk if you can’t make the payments.

* Don’t pay the balance until the job is completed to your satisfaction.

Distributed by United Feature Syndicate Inc.

What is the Role of Government For Surety Bonds?

Posted by on Aug 10, 2009

What is the Role of Government For Surety Bonds?

What is the Role of Government For Surety Bonds?
By Robert Jake

Who requires businesses to have bonds?

90% of businesses that need surety bonds are to satisfy a government regulation. In many cases bonds are needed to obtain a license or to perform a service for the government.

Why are bonds needed?

Bonds can be required for a variety of reasons. If the principal is performing services for the government the bond protects the tax payer’s investment. This extra step also helps the consumer by eliminating fly by night companies and provides an easier means of financial recourse.

Not all bonds just protect the obligee there are bonds that can protect the bonded business too. Fidelity bonds protect the employer from left by the employee.

What is the difference between surety bonds and insurance?

Insurance policies protect the business that is insured from slip and falls to fires. Insurance policies have a deductible bonds do not. With Surety bonds you cannot pick and choose the coverage you want with insurance you can.

Bonds are more of a reverse insurance policy. Surety bonds protect the obligee, not the business. The obligee can be the state, federal government or it can be a private obligee such as a bank or another business. If a bond claim arises the damaged party evolved can obtain financial compensation up to the stated bond amount unless specified in the bond form.

Without Surety bonds required by the government fraud would be more prevalent and the consumer would be out millions of more dollars every year.

Stimulus funds and surety bonds

The government has set aside a vast amount of stimulus funds for infrastructure projects. In order to be awarded stimulus funds a contractor must first bid on the project if there are the lowest bidder the contractor will be awarded the project.

Before the construction company can start the project the contractor will have to carrier a performance bond. A performance bond is different than a simple license and permit bond. These bonds are required to protect the tax payer’s money that is funding the project. Without the performance bond if the contractor defaulted on the project the tax payer would lose their investment.

Surety Bond information is hard to come by I hope this has help you with the Surety Bond Process. You can learn more about Surety Bonds with future articles

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Getting a Surety Bond is Harder Than it Should Be

Posted by on Jun 24, 2009

I found this article and thought it brought great insight about how getting bonds has become harder to get.

Sometimes getting a bond is harder than it should be. You search for days sometimes months trying to find a bonding agency that can help you. If you have Alt-A credit many bonding companies will not be willing to extend surety credit. Most Surety Company requirements require a minimum of a 660 credit score to extend credit. Since surety companies have a no loss philosophy. What I meant by that is if you get a claim on you bond you have to pay the surety back. So surety companies are weary on write bonds for clients at a financial disadvantage The surety most of the time wants to see businesses with a high credit rating as well as stable and strong financial. With the way the economy currently is it is harder for a business to obtain their license bond, when a surety does not want to bond a company that is showing a loss.

Surety companies have been reluctant on writing larger performance bonds since these bonds pose the biggest risk. With contractors not having the ability to borrow against their home. It has made it harder to increase their working capital to fund larger projects.

Contractors have been suffering the most. Now the SBA has expanded its bonding programs to help accommodate contractors with their growing needs. The SBA is now bonding contractors with higher limits. Contracts that need Performance and payment bonds are now able to perform larger federal jobs. This has brought relief to many contractors because surety bonding companies have not been willing to write larger bonds.

What are Surety Bonds? Can you get bonding if you have bad credit? If you want to know these questions and learn the Surety Bond process visit our blog.

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Differences Between Surety Bonds and Insurance

Posted by on Jun 24, 2009

Surety Bonds are for consumer protection that coincides with professional services and licenses. Surety bonds are one of the oldest forms of insurance dating back thousands of years. Surety bonds are more of a reverse insurance policy protecting the consumer not the principal of the surety bond.

Commercial Insurance protects your business from being sued. Most common Commercial Insurance such as general liability protects your business for injury or property damage such as a fire or a customer that slips on a wet floor. There are many different forms of commercial insurance that can protect your company; also there are many endorsements you can purchase to give you and your business peace of mind. With Surety bonds there are no special endorsements that you can buy to protect your business. The surety bond does not protect you or your company but the consumer or the obligee in case of fraud or whatever underlining statue referenced in the surety bond form.

Insurance indemnifies the policy holder and protects your business in the event of insurance claim. A good example of this is D & O Insurance. D & O Insurance protects the personal assets as well as your spouse’s assets from lawsuits steaming from wrongful termination, sexual harassment, discrimination based on sex, age race or age. There are no Surety bonds that would cover this.

Surety Bonds indemnify the surety company and protects the consumer or oblige in the event of a claim. In Insurance you pay an deductible and the insurance company covers the rest of the claim up to the policy limits. Also you usually have the option to obtain a higher deducible to obtain a lower premium for your policy. With Surety bonds you do not have any option to have a lower or higher deductible to lower or raise the premium; there are no deductibles. You must also pay the Surety Company back for any claim that was spent by the surety company.

Surety bonds a required by law to obtain a license or to perform government contracts. The government requires performance bond to guarantee that the money for a project will be completed and tax payers will protected. While some Commercial insurance products are required by law such as general liability or workmen’s comp, they are not usually required to obtain a license.

Insurance policies limits can be lowered or raised where surety bond amounts are predetermined by the State or Federal Government and the principal cannot change them. Bonds are underwritten similar to a loan where insurance policies are not. Indemnification for insurance policies restore the principal to the financial condition they where in before the time of the loss. Indemnification for the insured in surety bonds restore the surety company to the financial position it was once in before the loss occurred.

I hope this has clarified the vast differences of these two different forms of insurance.

Surety Bond information is hard to come by I hope this has help you with the Surety Bond Process. You can learn more about Insurance and Surety Bond news with future articles

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Upcoming Surety bonding requirements this year

Posted by on Jun 24, 2009

Upcoming Surety bonding requirements this year. This year we will see a lot more new surety bonding requirements from a variety of obligee’s. The reason why this will occur is because of the influx of claims from business defrauding the public. As businesses are facing closure desperate companies are violating the laws to stay open.

More restrictions as well as new bonds have been on the rise. Not to mention higher bond amounts as well as changing of the bond form languages for certain bonds. This has caused many businesses to close their doors do to bonds that were once considered a soft bond form to a hard to place bond.

New bonds as well as higher bond amounts
California last month tried to increase the bond amount required for car dealers from $50,000 to $100,000 the law was struck down but motion to reevaluate the new bill was granted.
So far this year a $50,000 Medicaid bond has been required for DMEPOS suppliers. The Surety bond is being required to hopefully combat fraud performed by DMEPOS suppliers. Even Suppliers of durable medical equipment such as prosthetics, orthodontist must obtain the bond.

Also this year a $25,000 MVD bond has been required for Indiana dealers. I have not seen a surety bond form as of yet but I will keep you posted. Texas MVD bonds have increased from $25,000 to $50,000 as well; the bond will still remain a two year term. Tennessee has also followed the trend by raising there bonds for auto dealers from $25,000 to $50,000 it is also a two year bond. Currently there are talks of increasing contractor license bonds for California as well.

Surety Bond types can be confusing you can learn more about Surety Bonds at our blog

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Offering Surety bonds fast

Posted by admin on Jun 16, 2009
Many times when you need a surety bond you need it fast. A few years ago before technology changed the industry it could take weeks to get a bond. Now with automated bond forms and applications getting surety bonds have never been faster or easier. With the ability of typing surety bonds on a computer via pdf instead of a typewriter has made getting a bond issued done in minutes instead of hours.  Underwriting is now preformed with in minutes with certain types of bonds of course. We understand that the surety bond may be your last step in obtaining your license and we want to help get into business. The majority of license and permit bonds we underwrite, can be approved with in the same day.

Tips on How to Obtain a Surety Bond

Posted by Rick on Apr 3, 2009

Over the course of the last two years the surety Bond Industry has under gone dramatic changes. Due to increasing claims caused from suffering industries such as the car industry and the mortgage industry Surety Bonding Companies have to tighten their belts. Bonding companies are now enforcing tougher requirements and are increasing rates to compensate for their losses. Due to underwriting changes many teetering clients that had preferred rates will now be placed in the subprime market. Many established companies that had a preferred rate last year cannot qualify this year for same price or their rate has gone up.

New businesses are suffering the most because preferred rates are now only for established companies. Collateral is also coming to play with many surety companies requiring it for the majority of the surety bonds they write for new business. With that said here are a few tips to help you obtain a surety bond without collateral and at a reasonable rate.

Tip one: if you are a new business and you do not have a business financial prepared create a start up business financial and create a business plan as well. A start up business financial or a business plan with some companies may help you with the rate by one or two points.

Tip two: send a resume Surety companies what to see experience. Showing experience may help you get out of subprime pricing.

Tip three: If your credit is a little shaky or your financial s are not up to pair apply with a co-signer. When applying with a co-signer make sure that the cosigner can qualify. Here are a few qualifications for co-signers.

Clean credit with no collections or delinquencies a 650 credit score or higher owning property and real estate. The real estate does not need to be owned free in clear. Keep in mind if you have a co-signer you will not be able to obtain preferred pricing but it may help you get a price break.

Tip four: Use a surety bond broker your local insurance agent may not have the markets to help you since surety bonding is a specialty field. Many surety bond agents have programs that can obtain surety bonds for new business with no collateral.

Surety Bond types can be confusing you can learn more I have been writing Surety Bonds for over 10 years

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Surety Bond program doubled

Posted by Rick on Apr 1, 2009

Surety Bond program doubled

The SBA surety bond program has now doubled their bonding limits to cover surety bonds up to $2,000,000.

If a company can qualify for a $2,000,000 they should be able to qualify for normal markets. Does any one know the need for these programs?

Surety Bonds with the SBA

Posted by Rick on Mar 30, 2009

Surety bonds for contractors written though the SBA’s program has  now increased  from a $2,000,000 limit to $5,000,000 limit. The SBA has also increased the surety bond size for  Federal jobs up to $10,000,000

The SBA wil back surety companies that are pratestpating in the SBA  programs for 70% to 90% of a loss that might occure.