In the most common type of surety insurance, a surety insurance company guarantees that a contract gets completed. As the underwriter, a surety insurance company examines the contractor's credit history, financial assets, equipment, experience, work history and management skills, then determines whether the contractor is a good risk for a particular bond. If a contractor defaults on the surety bond, the surety bond provider finds another contractor to finish the work.
Though a business might call itself a surety life insurance company, realize that surety is typically just part of the name. That type of business sells normal types of life insurance, rather than bonding someone’s life.
There are many reasons to buy surety insurance. Here are some of the most common:
1. Surety insurance guarantees your project's work schedule.
2. Surety insurance keeps project payments on a schedule.
3. Surety insurance protects against faulty craftsmanship.
Look for a reputable surety insurance companyLook for licensed surety insurance companies that have been in business for a number of years. Established companies should have wide range of surety bonds available. The company should also be in good operational standing in a number of states.
United States Department of the Treasury maintains a list of qualified surety insurance agencies.
Choose the type of surety insurance you need for your specific taskThere are surety insurance companies for every imaginable type of surety bond. As long as you know what kind of surety bonding you need, you can soon get your bonds ready so you can go to work on your project.
Get a surety insurance company to underwrite youOnce you apply for surety insurance, you must wait for the surety insurance company to carry out the underwriting process. The surety insurance company has to determine if you are in good financial standing. They must also decide if you have the business acumen needed to receive a bond. The underwriting process examines your business and financial statements, your credit history and other factors. Both your business and personal finances are subject to inspection.
- Contact your state's Department of Insurance to get the most reliable information on surety insurance companies that operate your state. Since all surety bond companies must have a license to operate in your state, the Department of Insurance has all of the pertinent information to answer any questions you might have.