For some reason a lot of people are intimidated by surety bonds. This is understandable: surety bonds are not a simple concept and take some time and effort to properly analyse and understand. This lack of understanding leads of lot of first-time buyers to repeatedly make mistakes in droves. Here are several of those mistakes so you can avoid them.
1. Which To Buy
Out of the dozens of industries and professions in the world today, there are thousands of bonds to go with them. A common mistake most beginner buyers make is not knowing which bond they’re buying (if any). This can be easily fixed by verifying the exact type of surety bond.
Sadly, new business owners are more likely to pay higher premiums for their bonds. Competitive rates are usually given to owners with a solid credit and a sound financial history. Here’s the kicker: there are new business owners who haven’t yet had the opportunity to build a strong credit line, and they will be eaten alive by these higher fees. Surety providers mean no harm, but a mistake many buyers make is not building a credit before buying a surety bond.
3. Wrong Bond Amount
It’s the duty of the principal to confirm the exact bond amount before applying for a bond.
Confirm the exact bond amount before applying for a bond. Seems simple enough – in theory and application. Government agencies (or anybody who requires the bond) usually provide a fixed bond amount. However, principals sometimes must compute the bond amount using a formula. If principals get this amount wrong, the bond will be rejected – and everything must be done again, which can get expensive. That’s why the buyer must quadruple-check the exact bond amount before taking out a surety bond.
4. Delinquent Sureties
Delinquent sureties victimise a lot of first-time buyers; they make for easy pickings. Reputable sureties help principals reach their goals and execute their bonds. (As well as providing the required risk coverage.) Therefore, verify the legitimacy of the surety that’ll issue your bond. You can do this by asking your state insurance commissioner for an authenticity check. You can also see if the surety is a member of the National Association of Surety Bond Producers.
In most cases, you’ll post a surety bond before a license, permit or certification for that bond is issued. There will be times that you’ll be asked to furnish a surety bond after these have been issued. When you’re asked to furnish this surety, you’ll be given a timeframe. If you do not submit the surety by this date and time, the certification/permit/license will be cancelled. Therefore, it is highly recommended to apply for surety bonds the moment you are asked to – preferably within the same hour, if not the same day.
Since bonds are a form of financial security, and sureties back the bond, buying surety bonds may be thought of to be tricky business. Nothing can be further from the truth. Whether your job type, occupation or profession requires you to legally purchase a surety bond, your work history, credit score and other financial records will be put under the microscope. If you have good credit scores, you will pay lower fees for your bonds – and the opposite is true. Bad credit scores mean you will pay premium fee for the bond application, and you may not even qualify if you do meet the fee price. Surety providers work only with buyers who are proven to be reliable and stable.