If you’re being required to post a surety bond for your business, either to ensure compliance with a government-required license or or to guarantee the performance of a contract, your primary focus will likely be to find the lowest possible price for your bond. While surety bond cost is certainly important, it is not the only factor that should be considered. You will also want to make sure you choose the right surety bond company, as they are not all created equal, and deciding to get bonded by the wrong bonding company can cause avoidable delays.
SURETY BOND COMPANIES: What you need to know
Are they licensed in your state?
Most of the surety companies we work with are licensed in all 50 states. This is something you’ll want to check on before purchasing a bond from a bonding agency or insurance company. If the surety company is not licensed in your state, your bond will be rejected by the obligee, which is the government department requiring you to be bonded. This can delay the entire licensing process, which can ultimately cost you time and more money.
What is their AM Best Rating?
A.M. Best Company, Inc. is the most well-known rating agency in the nation. They have developed a rating system for insurance & surety companies, which measures the company’s ability to pay valid claims. Ratings can range from A++ all the way down to F (in liquidation) and S (rating suspended). Fortunately, all of the surety’s Lance Surety Bond Associates, Inc. is appointed with have some sort of “A-Rating”, which allows us to provide a 100% money-back guarantee that a bond issued from our office will always be accepted by your obligee. Rating can be important to you, because some obligee’s will only accept bonds from A-Rated Bond Companies. This is something to check on before buying a bond.
Is the bonding company Treasury Listed (T-Listed)?
Being “T-Listed” means that a surety bond company is approved to write bonds for federal government contracts or other projects. This annual list is known as the Department of Treasury’s Listing of Approved Sureties, which can be found at http://www.fms.treas.gov/c570/c570_a-z.html. To make this list, bonding companies must undergo a review of their business financial statements by the U.S. Department of Treasury. The “T-List” includes some important information about each of these surety companies, including the state’s their licensed to do business in, along with their single bond limit for any specific construction job for the federal government.
What is their single bond and aggregate limit per customer?
If you own a small business needing only license bonds, bond capacity likely will not be a big factor when considering what bonding company to use. However, if your business needs to be licensed & bonded in multiple states, of if you will require multiple bonds, or larger bond amounts (i.e. construction bonds), you will want to know what type of capacity a surety bond company has. If the bond company does not have a large enough single bond, or aggregate bond limit, they may be unable to support your current bonding needs or expansion into other states. If you anticipate needing bonds for multiple state licenses, or needing a much larger bond line for big projects, be sure to inquire about the bond company’s capacity.