Contract Surety Bonds and How They Benefit the Contractors

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Surety bonds are an integral part of every corporate transaction. They are an assurance that the chances of any default ever happening will be very limited. Contract surety bonds in Florida also assure the contractor that he will have more opportunities than everyone with no bond to win the contract. With a bond around, the project owner is assured that he will never make any loss by hiring the said contractor.

But that’s just the gist of how surety bonds work. Winning more contracts than everyone else is not the only benefit for contractors. There are many other benefits for contractors too, such as:

  • They can access contracts not just locally but well beyond the boundaries of the state (and even country)
  • They can continue accessing their own funds without any additional burden of bank credit facilities
  • They have a bond that assures project owners of their financial stability without having to saying it.

Contract surety bonds in particular focus on the projects related to the construction industry. This sector not only needs business association between contractors and project owners, but also between contractors and their suppliers, contractors and sub-contractors, and more. All of these relationships can seek coverage under a contract surety bond. Those who have good financial position will have no trouble obtaining the bond. Those who have a shady past record will not be able to get the bond in the first place. This makes every transaction under a bond as secured as it can be.

Contract surety bonds can be significantly customized to suit your need. You can discuss your expectation with the surety company while pursuing a bond. They will run a check on you before sharing the best surety bond you can aim for. Always ensure that you consult them before seeking a surety bond.

Call your nearest surety agency today to get started.

How to Pick the Right Contractors Bonding Company

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Contractors commonly are required to have bid bonds, performance bonds and payment bonds. If you work as a contractor, sooner or later you will need to be bonded. It’s important to pick a reputable contractor bonding and insurance company. Here’s a simple primer on picking the right company:

Do your research: There are many bonding and insurance companies to pick from. You can do some online research and ask your peers in the industry for their recommendations. Make sure you go through the insurance companies’ websites and understand their terms and conditions.

Check credit ratings: Just as the insurer will check your credit ratings, you should also check the insurer’s rating. Their credit rating will affect your own position. If you submit a bond from a company known for unreliability or dishonest practices, your application may be rejected. Check the ratings given by independent agencies that score bonding companies.

Licensing: Make sure the contractor’s bonding and insurance company is licensed to operate in your state. If you are working in more than one state, go with a company that is licensed in all the states you are operating in. Many bigger companies will have multi-state licenses.

Treasury listing: Bonds are most frequently required for state or federal projects. A treasury listing, commonly known as a T-listing, means that the company has the approval to write bonds for federal projects. A T-listed bond also acts as an automatic check for its reliability.
To be approvedfor a T-listing, a company goes through rigorous scrutiny from the U.S. Department of the Treasury.

Bond capacity: If you are dealing with multiple bonds, the bond capacity of the contractors bonding and insurance company becomes critical. Every company will have an aggregate bond limit beyond which it cannot issue bonds. If you need multiple bonds across different states, the aggregate limit becomes very important

How to Pick Insurance Company for Contracting Business

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If you are entering into the contractor’s business, the first thing you must do is start looking for suitable contractors bonding and the insurance companies. Contractors typically require a number of bonds before starting with a project. These include license and permit bond, bid bond, performance bond, and payment bond.

Why you need the right surety company?

Reputation: When you select a surety, you should go with a reliable and reputable name. Remember, the surety will also represent you. Any obligee will trust a bond that comes from a well-known reputable company. The obligee will have the assurance that the surety is thorough in its investigation and hence, your bond will be deemed more reliable.

Support: A surety also acts as your protection if a dispute does arise. A good surety company will investigate a claim thoroughly and agree to pay up only if the claim is seen as legitimate. The more is their commitment to a fair investigation, the better are your chances. The surety becomes your support in this case.

How to pick a surety company?

You can follow the following steps when picking a contractors bonding and insurance company:

Research: You can check the top companies online. You can also ask your peers or others in the industry for reference. Check their website thoroughly, especially their procedures and bonding conditions. If you have a low credit score, check that the company will still consider your application. If they do, check their conditions.

Cost comparison: Do a cost comparison between different surety companies to find the one that fits your budget. You can ask for a quote. Some companies offer this service for free, while some will charge a nominal fee. Instead of going with the cheapest, find out the standard cost.

Fill the form: Fill the form on the website and submit it. You may also have to attach certain documents or send these by mail. You may also be asked to submit these when the application is approved. Once you’ve filled the application, the contractors bonding and insurance company underwriter will evaluate it and fix a cost.

Finally, you may have to sign an indemnity agreement and pay the fee to buy the bond.

Understanding Commercial Bonds

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Commercial bonds are so named because these are usually required from commercial organizations. These bonds are meant to ensure that businesses follow ethical practices and consumers are protected. You can get a commercial surety bond Florida from a licensed surety company.

There are different types of commercial bonds that can be broadly divided into:

License and permit bonds: These bonds are usually required from professionals who need a license to work, such as contractors, plumbers, and electricians. The license and permit bonds ensure that the licensed professional follows the codes and regulations of his/her profession. It is meant to ensure that the consumer’s interests are protected.

Public official bonds: These bonds are typically required to be held by public officials in positions of power particularly where the office deals with sensitive information. This includes judges, mayors, sheriffs, and treasurers. The purpose of the bond is to see that the official does not abuse its power. The public official bond is very important to ensure that the government works smoothly and in an ethical manner.

Court bonds: Broadly speaking, court bonds include judicial and fiduciary bonds. Judicial bonds are associated with litigation and both parties may be required to file a bond to ensure they carry out the court’s judgment. Fiduciary bonds are related to probate court and are required where a person is entrusted with the care of another’s property. The bond ensures that the fiduciary will carry out his/her duties faithfully.

Miscellaneous bonds: These are the commercial surety bonds Florida that do not fit under any other category. This includes alcohol bonds, warehouse bonds, fuel tax bonds, auto dealer bonds, lottery bonds, auctioneer bonds, utility bonds and more. Broadly speaking, these bonds are meant to ensure that the principal follows rules and regulations of his/her field.