Before you embark on a new construction project, you need to secure the required surety bonds. These bonds give the project owners peace of mind by ensuring you’ll meet your contractual obligations and complete the job as promised.
The world of surety bonds can seem overwhelming at first, so it helps to have a knowledgeable surety bond expert by your side to help you obtain the right bonds, navigate the underwriting process, and grow your bonding capacity over time.
Below, we’ll briefly define the different types of surety bond experts to help you choose the right fit for your business.
The surety bond landscape is made up of many key players, including:
This article will focus on the key questions you should ask surety bond producers if you decide to vet various surety bond agencies.
As with any industry, the longer a surety bond agency has been in business, the more you can trust their expertise. Their company’s longevity is a testament to their success and their clients’ satisfaction. You can learn more about their service quality by checking out their client reviews and testimonials.
Many professions outside of the construction industry require surety bonds. Manufacturers, mortgage brokers, and travel agencies are just a few examples.
Since the construction industry has unique challenges, it’s important to work with a surety bond agency that specializes in contract surety bonds. Look for an agency with a dedicated team of contract experts who can help you understand your bonding requirements and avoid common pitfalls associated with the construction industry.
Learn More: The Essential Role of Surety Bonds in Keeping Your Contracting Business Compliant
Surety bond agencies typically work with multiple surety companies. The quality of their relationships with these companies can directly influence your ability to secure bonds efficiently and obtain favorable terms and conditions.
Choosing an agency with strong relationships with reputable surety companies may help you obtain better rates and terms, even if you're a newer contractor or have less established financials. Additionally, an agency with well-connected bond producers can help advocate for your best interests by working closely with surety underwriters and bond claim departments.
Here are some questions to help you evaluate your surety bond agency’s market relationships:
Before choosing a surety agency, you should carefully assess their producer's communication. They should be able to explain the bonding process in layman's terms, outline your bonding requirements, and offer timely updates about the status of your bonds. They should also be readily available to answer your questions at any stage of the bonding process.
Some questions to ask during this evaluation are as follows:
Along with answering your questions, a good producer will also inquire about your business. For example, they may ask you:
As your business grows, you may want to take on larger projects. But first, you’ll need to increase your bonding capacity. Bonding capacity is the maximum amount of bonded work you can take on at any given time. Your surety company sets your bonding capacity based on your financial stability, contracting experience, and reputation.
Since your bonding capacity directly impacts your growth potential and profitability, it’s important to ask your surety bond producer the following questions:
A good bond producer can help you identify areas for improvement and offer advice on how to grow your bonding capacity as your business expands.
Learn More: 10 Tips for Increasing Your Bonding Capacity
Surety bond premiums can range from 0.5% to 3% of the total bond amount, depending on the type of bond you need and your personal risk profile. Thus, you should ask your producer for a clear breakdown of the costs involved in the bonding process. If they're transparent about the bond costs and clearly explain the terms and conditions, that’s a good sign.
You can also ask your producer how you can improve your risk profile to reduce your bond premiums in the future. You may be able to lower them by:
Underwriting allows surety companies to assess your financial health, experience, and ability to fulfill your contractual obligations. The speed of this process can impact your ability to move forward with projects in a timely manner.
Underwriting timelines can vary depending on several factors, including your bond size, bond type, and financial standing. Smaller bonds often have faster underwriting, while larger, more complex bonds may require more detailed financial documentation.
Since a surety bond agency depends on surety companies to write the bond, timing is somewhat out of their control. However, if the agency maintains quality relationships with the market, they should have a good idea of a company's typical underwriting timelines. Be sure to ask the following questions with this in mind:
An experienced surety bond producer will walk you through the underwriting process and ensure all of your documentation is submitted correctly to mitigate the chances of bond denials.
While your surety bond producer can help clarify your contractual obligations, it’s up to you to fulfill them properly. If you don’t, you may face claims against your surety bonds. The most common claims arise from failing to perform your work as agreed or failing to pay your subcontractors and suppliers on time.
Every surety bond company has its own claims process. Thus, it’s important to ask your surety bond producer about your bond underwriter's claims process details. You can also ask your surety bond producer if they have any tips for avoiding claims in your industry and niche.
Along with doing your own research, it’s helpful to hear from other contractors who have worked with your surety bond agency. Make sure to ask your producer for references and check out their online reviews.
If other contractors report positive experiences, you can feel more confident in your choice to proceed with a specific surety bond agency.
Now that you know what questions to ask surety bond agencies, you can start searching for one that’s well-suited to support you for years to come.
Looking for a reliable option? At BOSS Bonds, we have over 40 years of experience serving contractors with their surety bond needs. Thanks to our industry expertise, personalized service, and competitive rates, our contractor clients trust us to get them the bonds they need quickly and efficiently.
Contact our dedicated contract team today to see how we can support your business.