If you’re new to surety bonds, selecting a provider to buy from might feel overwhelming. There are many surety agencies and companies on the market making it difficult to know which provider to choose.
This guide will help you understand important criteria to look for so you can make the best decision for you and your business.
What Is a Surety Bond Provider?
A surety bond provider is a general term describing companies, agencies and other businesses that administer bonds.
You can work directly with a surety underwriting company or shop the market through an agency or brokerage.
- Surety Company: A financial institution that issues bonds to guarantee that a party will fulfill their obligations.
- Surety Agency: A brokerage that works with multiple surety companies to streamline the application process and provide competitive rates.
For example, SuretyBonds.com is an agency, which means we partner with the nation’s top surety companies to issue bonds online quickly and affordably.
How Do Surety Bonds Work?
A surety bond is an agreement between three parties:
- Principal: The individual or business who performs the obligation
- Obligee: The entity which requires the bond to guarantee fulfillment of the obligation
- Surety: The provider that issues the bond to the principal
A surety company can be thought of as a “middle man” between the principal and obligee. They back the financial obligation to the obligee if the principal fails to uphold the contract.
What to Look for When Choosing a Surety Provider?
A bond is a legally-binding agreement with serious financial implications. It’s important to perform due diligence and vet any provider you plan to work with.
While you are searching, look for these four valuable qualities:
- Licensed: Verify that your provider is certified to issue the bond you need in your state.
- Helpful: Choose a company known for its helpful and responsive staff. Positive reviews can reveal how well they support clients during the bonding process.
- Reputable: Look for a provider with significant industry experience and a solid track record.
- Affordable: Compare rates and fees from various providers to ensure that you receive a good value. Agencies can offer competitive pricing, but avoid those that add on service or brokerage fees.
How Do Bond Providers Handle Claims?
When selecting a surety provider, it's essential to understand their approach to handling claims to ensure you choose a dependable partner.
Here's an overview of how a surety bond company typically processes claims:
- Confirm: Verify receipt of the claim to the claimant
- Gather: Ask for written proof and supporting documents related to the claim
- Investigate: Review relevant files and documents, possibly involving experts or site visits
- Assess: Notify the obligee and principal of the decision. If the claim is valid, inform the principal to resolve it; if denied, only inform the obligee
- Pay: If the principal does not resolve the claim, pay the claimant and seek reimbursement from the principal
How Can I Find Surety Bond Providers for My Industry?
As you look for a surety company, pay attention to their areas of specialization and industry expertise. Most companies will advertise which bonds they are proficient in.
For example, SuretyBonds.com issues nearly every category of bond, but is the industry leader in license and permit bonds. From auto dealers to public notaries — we can cover nearly any type of professional. Other agencies may specialize solely on one type of bond, such as contractor bonds.
