Category: Surety Bond

July 6, 2016

Are all Surety Bond Producers the Same?

Choosing a surety bond producer that is competent and knowledgeable could save your business a good amount of money.  In past Facebook posts, we’ve briefly mentioned the benefits of choosing a surety bond producer who is knowledgeable and competent in order to make sure that you get the correct bond with all the t’s crossed and i’s dotted so that you have the best chance at winning a bid.  But there is also another reason. What to look for in a Surety Bond Producer With surety bonds, you are the one that pays the claim if someone files against you.  The surety bond is there as a three party contract.  But what happens if your surety bond doesn’t fully protect you, and you have to pay for a false claim or pay more than is necessary?  This is where it is important to make sure that the surety bond producer you choose to do business with has years of experience and knows the field, so that you are protected as well. With some larger surety bond producer companies, you are just a numbered file in a filing cabinet. But at Surety Bond Professionals, we pride ourselves on customer service and...

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By M L

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June 28, 2016

Surety Bonds Vs Subcontractor Default Insurance

We started a conversation on our Facebook page the other day about the differences between surety bonds and subcontractor default insurance.  We wanted to delve in a little more to help you decide if a subcontractor default insurance (SDI) or surety bond is the best way to protect your business. SDIs have become popular since 1996 as a way for contractors to manage the risk of working with subcontractors.  Basically, through SDIs, the contractor is accepts and manage risks that occur if a subcontractor defaults on their contractual obligations. The trade off is, that the benefits of a performance or payment bond are not applicable in SDIs. Below we break down the different benefits and risks. One of the differences between surety bonds and SDIs  are that there are specific regulations in the surety bond industry, which the state insurance department enforces.     Bond forms are also standard (although are negotiable) in a surety bond. Whereas,  the insurance company mandates which form the parties will use with an SDI.  A surety bond also has the benefit of protecting all three parties (obligee, principal and surety).  An SDI is a two party contract between the insurer and principal. The premium is...

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By M L

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June 20, 2016

The Importance of a Work In Process Schedule for the Contracting Company and the Surety Company

A Work in Process schedule (WIP) helps contractors document the progress of their project.  A WIP also helps the surety company to evaluate the progress of the project as well.  A well-documented WIP can help the contracting company earn future approval for surety bonds. In a general WIP, some of the things documented are the contract price, billings to date, costs incurred to date, estimated completion cost and estimated gross profit. These help the contractor show that they are completing the project on time and without additional costs. The reasons a WIP is important for a surety company is that it helps to monitor profitability, any errors and profit fade and gains that may happen.  The surety company is also able to evaluate billing practices of the contracting company.  A WIP also helps to back up the contractor’s financial strength on the project. It is important to have Certified Public Accountant (CPA) organize the contractor’s financial records, to provide to the surety company. Summary: A WIP is important for both the contractor to stay on schedule and document any shortcomings.  It is important also for the surety company to monitor and evaluate progress and any discrepancies. A proficient WIP can help...

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By M L

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June 15, 2016

Warning Signs that may Deter your Bond being Processed

Many contractors find that the surety bond process can be complex. But, having a competent and knowledgeable surety bond producer is the first step to making sure your project will get underway. By answering the following questions, a contractor may be able to determine if there may be a delay in approval. Questions to Consider: 1. Is there already a claim open with the current surety? If another application has not yet been approved, that may be a warning sign that there is a reason for the delay. The best way to correct this is to (a) resolve any issues with the surety bond claim and (b) work with the surety bond producer, if both parties cannot resolve the issue on their own. 2. Is the project within the realm of the contractor’s expertise? If not, the underwriter may worry that the lack of  understanding of the project may delay it.  The best way to remedy this is to explain why the contractor is bidding on the project, how the contractor will avoid and/or solve any potential risks and why the contractor is seeking this particular project. 3. Is the project outside of the home turf? If the contractor is bidding on a...

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By M L

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financial guarantee bond

June 5, 2016

Financial Guarantee Bond – Apply Now

A financial guarantee bond can be difficult for an applicant to obtain approval for.  But, with the right expertise from a surety bond producer, it can be done with very little hassle. These bonds encompass a large number of different types of bonds where the only remedy is straight financial payment. Learn more below, or request a quote today. What Is A Financial Guarantee Bond? A financial bond is an indemnity bond which cannot be cancelled.  In the case that the principal cannot perform their contractual obligations, it ensures that they will reimburse the obligee for the violation. Some examples of a financial guarantee bond are tax bonds, Medicare and Medicaid bonds. Because of the complexity of these bonds, they can be extremely hazardous. Therefore, they are carefully underwritten. Generally, the insurance company guarantees that the business bonded pays the principal and interest according to the contractual agreement or promissory note.  Due to the complexity of financial guarantee bonds, it is a customary recommendation that the surety producer familiarizes themselves with the specific requirements.   Factors Impacting Cost A commercial bond application: This provides general information and may help the surety bond producer determine the bond amount, who is asking for...

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By M L

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