General FAQs

What is a surety bond?
What Types of bonds are there?
What is the process to obtain a bond?
How do surety bonds work?
What good is a bond if I have to pay for claims?
How much do surety bonds cost?
Who is the obligee?
What is a blank bond form and where do I get one?
What is the turnaround time?
Why does my spouse have to sign the indemnity agreement?

 

What is a surety bond?
In the simplest terms, a surety bond is a financial guarantee. What the bond guarantees varies depending on the language of the bond, It is a form of credit, not insurance.

What Types of bonds are there?
Please see our FAQ’s on: Contract, Commercial and Notary bonds

What is the process to obtain a bond?
To start the process you need to fill out an application here

How do surety bonds work?
The principal (you) pays a percentage of the bond amount called a bond premium. In return, the surety extends "surety credit" to make the required guarantee (the bond). A claim can arise when the principal does not abide by the terms of the bond. In the event of a claim, the surety will investigate to ensure it is valid. If the claim is valid, the surety will look to the principal for payment of the claim and any associated legal fees.

What good is a bond if I have to pay for claims?
A bond is not insurance, it is a form of credit where the principal (you) are responsible to pay any claims. The alternative to a bond is to post cash or a letter of credit. Surety bonds are advantageous, as they typically require no collateral, which frees up capital. Bond premiums are also similar to fees for letters of credit and are typically less than one would earn making conservative investments with the available capital.

How much do surety bonds cost?
Bond premiums vary greatly depending on the applicant, the bond type, surety, and the obligee. Just like other forms of credit, everyone does not receive the same rate. Standard market rates are typically anywhere from 1-3%, while higher risk markets can range anywhere from 8-12% of the bond amount.

Why do I need a surety bond?
Simply because a government authority or private entity is requiring the bond in order for you to operate. The bond ensures you will follow their guidelines.

Who is the obligee?
The obligee is whoever is requiring the bond of you. You are not the obligee. For example, the obligee for a contractor would be whoever they are doing the work for. The obligee for a license bond (e.g. auto dealer or mortgage broker) would be whoever they are filing their license with.

What is a blank bond form and where do I get one?
It is a blank copy of the bond that you are required to post. It states exactly what the bond is guaranteeing. Your bond agency will use it to create the original bond by completing the blanks on the form, signing on behalf of the surety, and attaching a power of attorney. You need to obtain a blank copy of the bond form from the obligee.

What is the turnaround time?
Approval time varies depending on the type of bond and the program the applicant falls under however most standard market bonds are completed in 3-4 business days after the application is returned, and most nonstandard bonds are 4-8 business days due to the increased underwriting requirements.  

Why does my spouse have to sign the indemnity agreement?
Bonding companies have several reasons why they would like your spouse to personally guarantee the bond. Spouses are often required to sign, as a married couples may have joint assets, which may have to be sought after in the event of a claim.

For Contract Bond FAQs, please go here. For Commercial Bond FAQs, please go here. For Notary Bond FAQs, please go here.