Blog Posts Categorized: General - Page 11

Not everyone who applies for a surety bond will be approved. Additionally, of all the applicants who are approved, some will pay a much higher premium for a bond than others. That�s because the primary consideration in evaluating surety bond applications is the applicant�s personal credit score. A high risk surety bond is simply a surety bond underwritten by a surety company that is willing to work with people who are credit-challenged.

If you have poor credit and need to get bonded, contact Single Source Insurance today. We can work with you to get you the bonds you need.

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Why Are They Needed?

Without high risk surety bonds, people with past credit problems, including bankruptcies, judgments, or liens might not be able to get the surety bond they need in order to obtain a business license, work on publicly funded construction projects, serve as the guardian for a minor, or take on any other job or responsibility that requires bonding.

You might be wondering why your credit score matters if you have enough money to pay the bond premium. The problem is that if you violate any of the terms and conditions of your bond�for example, by failing to comply with a state law regulating your industry�anyone who suffers a financial loss as a result of your actions can file a claim against your bond.

If that happens, the surety company that issued the bond will step up and pay the claimant on your behalf. But that payment is essentially a loan to you, which must be repaid in full. That�s what the surety company is concerned about�whether you have enough money to reimburse them for any claims they pay for you or are creditworthy enough to borrow the money elsewhere to reimburse them.

What Do They Cost?

There are two factors that enter into the premium calculation for any surety bond: the required amount of the bond (known as the bond�s penal amount) and the premium rate. The penal amount is established by the bond�s obligee�the party requiring the bond. The premium rate is set for each applicant by the surety (the company underwriting and issuing the bond).

The rate paid by applicants with good credit is referred to as the standard market rate, which is between 1% and 3% of the full penal amount of the bond. The rate for individuals with poor credit, however, can be as high as 5% to 15% of the bond�s penal amount. Some sureties allow applicants to pay for their bonds in installments rather than a single premium payment for the entire year or bond period.

Is Collateral Required?

In some cases, the surety may require an applicant to put up collateral to ensure reimbursement for claims paid by the surety. When collateral is required, it may be as much as the full penal amount of the bond.

Bad Credit? You Can Still Get Bonded

At Single Source Insurance, we make it easy to get a bond, even with bad credit. If you have credit issues that could put you in the high risk category, we can still work with you. Apply online today!

Surety bonds are required for a number of different purposes�in order to obtain a business license, to be awarded a construction contract, or to satisfy a court order, for example. They serve as the bonded individual�s pledge to act in accordance with all relevant laws, rules, and regulations, as spelled out in the surety bond contract. But how long are they good for? Let�s take a look.

How Do They Work?

Regardless of the purpose of a given bond, all surety bonds involve three parties who are bound together by a surety bond agreement. The obligee is the party who requires the bond and establishes the maximum amount that the bonded individual must pay to claimants. The principal is the party who is required to obtain the surety bond and maintain it for a specified period of time. The surety is the party that underwrites and issues the bond and renews it as needed.

During the period of time that the bond is in effect, a party who is harmed financially by the unlawful or unethical actions of the principal may file a claim against the bond. The surety verifies the validity of each claim before paying it as an advance on behalf of the principal. Ultimately, however, the principal is financially responsible for claims and must reimburse the surety for all payments made to claimants.

How Long Are They Good For?

License & Permit Bonds

Many of the surety bonds issued are license and permit bonds that must be purchased as part of the process of becoming licensed to conduct business in a particular profession. If you work in a profession or occupation that requires licensing in order for you to operate legally in your state, you’re likely to be required to obtain this type of bond. For example, all states have their own requirements for licensing as a motor vehicle dealer, and they all involve the purchase of a surety bond.

In such cases, there must be a bond in place at all times to avoid license revocation. This typically means renewing the bond at every license renewal to maintain continuous coverage. The bond agreement may specify a bond term length of one year or more, as long as the premium for the entire period is paid up front. The specific time period of your bond will be determined by the bond type and any regulations in place. For questions, contact our knowledgeable agents today.

Construction Bonds

Construction bonds typically have a coverage period for the entire duration of the construction project, though there can be some that extend beyond a project completion date. For questions, contact our knowledgeable agents today.

Court Bonds

Court bonds must be effective for as long as it takes to resolve the legal matter the principal is involved in. Or, the bond period may be specified for as long as the principal has fiduciary responsibility—for example as the guardian of a minor or executor of a state. For questions, contact our knowledgeable agents today.

Your Responsibility To Renew

Whatever the duration of the coverage period, it�s the principal�s responsibility to respond to the renewal notice from the surety and renew the bond by its expiration date. The surety will review the same factors considered when setting the premium for the original bond purchase and calculate the renewal premium that must be paid to keep the bond in force.

Get The Bonds You Need

Single Source Insurance offers a wide range of bonds with convenient online applications. We�ll work with you to get a surety bond with the coverage period you need.

Are you wondering how to qualify for a surety bond? Read this post! This guide should tell you everything you need to know. If you have any questions, don�t hesitate to contact our knowledgeable agents.

What Are Surety Bonds?

A surety bond is the purchaser�s guarantee to abide by relevant laws, rules, and regulations or pay the price, so to speak. These requirements are spelled out in the terms and conditions of the surety bond agreement. The bond provides funds to compensate parties who suffer a financial loss caused by the unlawful or unethical actions of the bonded individual.

Though surety bonds are often confused with insurance policies, they are fundamentally different. The main difference lies in who benefits in the event of a claim. While an insurance policy pays a monetary benefit to the policyholder, a surety bond pays claims filed by those injured by the bonded individual. It�s important to understand that distinction.

How Do They Work?

The three parties to a surety bond agreement are:

• The obligee (the party that requires the purchase of a surety bond)
• The principal (the party purchasing the bond)
• The surety (the party underwriting and issuing the bond)

The obligee establishes the required amount of the bond, also referred to as the penal amount. This is the total amount of money guaranteed to pay claims against the bond.

The principal pays the surety a premium to obtain the bond, which is good for a predetermined period of time. If within that period of time the principal violates the terms and conditions of the bond, any party who suffers a financial loss as a consequence has the right to file a claim against the bond.

The surety will ensure that any claim is valid before paying it. However, the ultimate legal responsibility for paying claims rests with the principal, who must reimburse the surety for the amount paid out on the claim. This is price the principal pays for having failed to live up to the terms of the surety bond.

How Do I Qualify?

The surety�s main concerns in evaluating a surety bond application include:

• Whether the applicant is likely to incur claims
• Whether the applicant has the ability to reimburse the surety for any claims paid

The key factors the surety looks at when qualifying applicants are:

• The applicant�s personal credit score
• Personal and business finances
• Assets
• Resumes or other evidence of industry experience and professional reputation

These factors all may enter into the surety�s approval of an application. But what typically determines the premium you will pay for the bond, is your credit score. The higher that is, the lower the premium you will pay.

Get Qualified Today

Want to know if you qualify? Simply apply for a bond with Single Source Insurance online. We offer a wide range of bond types with quick turnarounds.

You may be familiar with surety bonds, but do you know how the process really works? Don�t worry, we�ve got you covered. Here�s a useful guide to help you understand what surety bonds are and how the process works.

For all of your bonding needs, Single Source Insurance is here. We offer a wide range of bonds with convenient online applications nationwide.

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What Is A Surety Bond?

A surety bond is a contract binding together three parties: an obligee, a principal, and a surety. Each of these parties has specific rights and responsibilities that are spelled out in the terms and conditions of the surety bond. The obligee is the party requiring the bond, the principal is the party required to purchase the bond, and the surety is the company that underwrites and issues the bond.

The purpose of a surety bond is to protect the obligee against financial loss resulting from the principal�s failure to live up to the terms of the bond agreement. The bond serves as the principal�s pledge to act in accordance with relevant laws, rules, and regulations and to make whole any party that incurs a financial loss due to the principal�s unlawful or unethical practices.

Who Needs Them?

Surety bonds are used for a wide variety of purposes in a wide variety of fields and industries. They are most commonly required as part of the process of becoming licensed in a particular profession (license and permit bonds), for construction contractors bidding and working on projects (construction or contractor bonds), and in legal proceedings (court bonds).

There are a variety of bonds available. Explore by category at Single Source Insurance:

• Construction Bonds
• Commercial Bonds
• Court Bonds
• License & Permit Bonds

How Do They Work?

Surety bonds are often mistakenly thought of as a form of insurance, but that�s not the case. While insurance protects the insured from financial loss, a surety bond protects others and obligates the principal to compensate them for their loss. In the event that the principal does not comply with the terms and conditions of the bond agreement, any party that suffers a financial loss as a consequence may file a claim against the surety bond.

When a claim is filed, the surety investigates to determine whether it is warranted. Upon determining that a claim is valid, the surety typically pays it on behalf of the principal and is subsequently reimbursed by the principal. An indemnification clause in the surety bond contract ensures that the surety can recover the amount of the claim from the principal.

How Much Do They Cost?

The principal pays a premium to obtain a surety bond. That premium is a small percentage of the full penal amount of the bond. While the penal amount of the bond is set by the obligee, the premium rate is determined by the surety based on certain underwriting factors. The most significant factor used in determining the premium is the principal�s credit score.

Bond applicants with good credit generally pay a premium rate of between 1% and 3%, which is the standard market rate. Those with poor credit may still be able to get bonded but will pay a higher premium rate.

Get The Bonds You Need

Whatever type of surety bond you may need, our experienced surety professionals are here to help you. Explore our site to quickly find the bonds you need, and apply online today.

If you are in need of a surety bond, it�s important to understand the steps required. Read on to learn more about the surety bond underwriting process, or request a quote today. At Single Source Insurance, we offer bonds nationwide, and our knowledgeable agents are ready to assist you with any questions you may have.

What Is Underwriting?

Underwriting is all about the assessment of risk, specifically financial risk. It�s the process through which an individual or institution decides to take on a given financial risk for a stated fee and under what circumstances. For example, if you�ve ever purchased life insurance, you may have had to undergo a physical exam. You were likely asked your age, your height and weight, and certain other key facts that the underwriters then used to determine your likely life expectancy, insurability, the terms and conditions of your policy, and the premium cost you would pay.

Surety bond underwriting is much the same. The underwriters� job is to determine the degree of risk involved in issuing a given type of bond to a given applicant and the premium cost to the applicant.

What Are the Risks?

Different types of surety bonds carry different risks in terms of the ways in which the bonded individual (the principal in the surety bond agreement) can incur a claim. But they all boil down to the principal committing a prohibited action or failing to perform a required one. In either case, the principal would be in violation of the terms and conditions of the surety bond, and the entity protected by the bond (the obligee) would be entitled to file a claim against the bond to recover any resulting financial loss.

The bond forms filled out by surety bond applicants spell out the principal�s obligations under the bond and reflect the governing regulations, statutes, and ordinances. The obligee that requires and is protected by the bond establishes the required bond amount, also known as the penal amount of the bond.

The underwriters need to learn enough about the applicant to determine:

1. The risk that the applicant will somehow violate the terms and conditions of the bond to the financial detriment of the obligee
2. The applicant�s ability to come up with the funds to pay any valid claim up to the full penal amount.

The Three C�s of Surety Underwriting

Surety underwriters examine certain facts to establish confidence in each applicant�s character, capacity, and capital. A principal with good character is less likely to engage in unlawful or unethical behaviors that could result in a claim against the bond. A principal with the capacity (skills, knowledge, and resources) to live up to the terms and conditions of the bond is also unlikely to incur claims. And capital enters into the picture because the principal is ultimately financially responsible for paying all valid claims.

What Do Surety Underwriters Consider?

One of the key factors that surety underwriters consider is the applicant�s credit score. A principal with good credit will pay a lower premium rate than one with poor credit, because a good credit score means that the principal should be able to borrow money if necessary to pay a claim.

This is important because surety bonds do not transfer the financial risk of paying claims to the surety company. Virtually all bonds contain indemnity clauses that provide financial protection for the surety. The surety typically will pay a claim as an interim measure, but the principal is then legally obligated to reimburse the surety. Therefore, an applicant�s ability to borrow is crucial to establishing the confidence of the underwriters.

In addition to an applicant�s credit score, surety underwriters will want to see personal and often business financial statements as proof of capital and financial stability. In some instances, underwriters will request resumes or other proof of expertise and experience. In fact, the underwriters my request any documentation they feel is necessary to evaluate the applicant�s character, capacity, and capital.

Get Bonded Today

Single Source Insurance offers a full range of bonds nationwide. To get started, simply fill out our online application form. Our knowledgeable agents are ready to answer any questions you may have about the underwriting process.

Surety bonds are a fact of life in the construction industry. Construction projects can cost a great deal of money�taxpayers� money in the case of public works projects and investors� money in commercial projects. Many states and municipalities require a contractors� license bond, simply to operate legally as a contractor or subcontractor. The three other types of surety bonds most often associated with construction projects are bid bonds, performance bonds, and payment bonds. Learn more about each below, and request a quote from Single Source Insurance today!

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Contractor�s License Bonds

In some states, contractors are licensed at the state level. In other states, the only licensing requirement for contractors is at the municipal level. In nearly all jurisdictions where licensing is mandatory, obtaining a license bond is also mandatory. A contractor�s license bond protects the state or municipality, as well as the public, from financial loss due to the unlawful or unethical actions of the construction contractor.

A contractor�s license bond typically obligates the contractor to abide by all applicable laws and industry standards. Failure to do so can result in a claim on the bond.

The Miller Act

Performance bonds and payment bonds are both requirements stemming from the Miller Act�federal legislation that applies to public works construction, modification, or repair projects valued at $150,000 or more. The Miller Act requires the general contractor selected for such projects to obtain a performance bond to protect the federal government and a payment bond to protect suppliers and subcontractors. Many states have their own �Little Miller Act� legislation that provides similar protection for state entities sponsoring public works projects.

Performance Bonds

Performance bonds guarantee the satisfactory completion of a project in accordance with the terms of the bond. It’s not uncommon for a contractor to underestimate costs and become insolvent before completing a project. In such cases, the project owner often must hire another contractor to complete the job.

A performance bond also protects the project owner (and by extension, taxpayers or private investors) against financial loss due to any unlawful or unethical actions of the contractor.

The only party that is entitled to file a claim against a construction performance bond is the project owner�known as the obligee in the bond contract.

Payment Bonds

Payment bonds are used to ensure that suppliers, laborers, and subcontractors are paid properly and promptly. Without a payment bond, any party not paid according to the terms of the contract could file suit, and a lien could be placed on the property. Requiring the contractor to obtain a payment bond ensures that the property will be lien-free when the project is completed.

Bid Bonds

Bid bonds are not specifically mandated by the Miller Act, but they are commonly required by both public works and private project owners. A bid bond is the contractor’s pledge to accept the job if chosen as the winning bidder. This guarantee protects the project owner against having to go through the bid evaluation or contract negotiation process again with another contractor. A bid bond requirement is intended to discourage frivolous bidding.

How Do Construction Bonds Work?

When a claim is filed and proven to be valid, the surety typically pays the claim up front and then seeks reimbursement from the contractor. Surety bond contracts contain indemnity clauses that make the contractor legally responsible for repaying the surety.

How Much Do They Cost?

The cost of any bond is a small percentage of the required bond amount. While the bond amount is established by the obligee requiring the bond, the premium rate you will pay is determined by the surety�the company that underwrites and issues the bond. The exact percentage is based on an evaluation of such factors as the applicant�s personal credit, personal and business financial standing, and industry experience.

Request A Quote

Take advantage of our vast experience in the surety bond business to help you obtain any construction bonds you need. Apply today through our convenient online form!