One common misconception about surety bonds is that they are just another form of insurance. That’s right in the sense that they offer a sense of security that you can complete the work you promise to complete. It’s not technically correct in the traditional sense of what insurance is and what it does. Surety bonds aren’t free money to reimburse you for loss. They’re a loan to cover you in the event that you don’t live up to your expectations.
If these bonds are a loan, then, how are they paid out? What are the terms of payment and repayment? How does the process work? Can using a bond destroy your business? Explore the process of using a bond when something goes wrong on a job, how surety bonds are paid, and what it means to your business to call upon your bond.
Applying for a Surety Bond
Applying for a surety bond requires an application process which includes information about your business and personal finances, which will be used to calculate the premium of the bond. These premiums will range anywhere between 1 to 5 percent of the total bond amount if you have good credit, and could range up to 15 percent if you have poor credit.
How Surety Bonds are Paid?
In general, you’re going to pay the premium for a surety bond up front. They’re sort of like a form of secured credit for your business. It’s very rare for a bond company to offer payment plans for their services. You’ll need to have your payment clear before a bond is issued. That means you’ll want to be very careful about how you choose to pay. Your bond is underwritten as a kind of credit which promises to pay unexpected expenses. After this, you’ll need to repay the bond in full.
Paying for Bond Renewals
Often, a surety bond, once written, can be renewed for extended periods so you can keep them active. You’ll need to talk to your bond issuer to determine if the bond is renewable, and determine what the terms are to renew them. If it is able to be renewed, you’ll need to pay the new premium up front before your existing coverage ends. Failing to do so will result in the bond expiring.
This may not be a big deal for your business, especially if you’ve never had to use a bond because you always live up to your responsibilities. It does, however, mean that you’ll have to start the entire process all over again and get your bond re-written from scratch. Simply renewing your bond if possible can be a big time and effort saver, so if you can do so, it’s often best to take this approach.
Reliable Surety Bond Services
If you are in need of the best reliable surety bond services for your company, contact National Surety Services, Inc. For over 25 years we have served businesses all over the nation, allowing them to operate with confidence and transparency. We’re here to help give you and your clients peace of mind. Contact us to get started today.