Surety bonds are intended to provide assurance in business situations that are perceived to be high risk. With this type of arrangement, the surety bond promises the obligee that a third party--someone other than the principals--will take care of their obligations and responsibilities regarding the project or task at hand. In industries such as construction, this type of bond is considered a safeguard.
Instructions
1. Call your insurance agent to see if he represents insurance companies that deal with surety bonds. If your agent doesn't, ask for a recommendation of an agency that handles surety bonds or a company to deal with directly. Also, check with business associates within your industry to see if they have suggestions or feedback on surety bond insurance agencies. Another excellent resource for finding surety bond companies is the Department of the Treasury's Listing of Approved Sureties website (see Resources).
2. Contact any companies that interest you to request further information or a consultation. Some underwriters offer free online quotes that detail the price range based on your financial history and credit. These online quotes are merely estimates; for an exact quote, you must speak directly with a surety bond agent. Other insurance agencies can take your information and application and shop it to multiple companies that provide surety bonds. If you are shopping around for the best rate, this may be a good option for you.
3. Inquire about the penal sum when you speak with your surety bond agent. The penal sum is the predetermined financial amount that the surety must pay should the principal default on the terms of the agreement. The penal sum helps the surety to determine the level of jeopardy or risk, which consequently helps to determine the surety.
4. Complete the application process. Once you have chosen a company to deal with, it will typically ask you to fill out a surety bond form which includes all of the legal information about your bond. The application process also will include providing obligee information and financial and credit history documentation. Additional information such as a business plan and letters of recommendation from reputable sources may be requested. The amount of time it takes for your application to be processed varies depending on the agency. Generally, you can expect an answer within a few business days. Certain agencies will respond in the first 24 hours and in some instances, your agency representative may even able to get back to you within a few hours.
5. Receive the rate for the surety bond. After approval, the agency will provide you with a rate and you'll begin paying the premium for the surety bond.
