Surety Bond Blog

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.

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

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