Surety Bonds

What is a surety bond?

Within the insurance industry, a surety bond is a written commitment between three individual parties which guarantees a contract’s execution as it has been agreed upon. Contractual aspects which are addressed by surety bonds include price, performance and payment agreements. The three parties required for the issuing of a surety bond are:

  • The Obligee: Entity that Benefits from and Requires the Bond (State Legislators).
  • The Principal: Individual, Client or Business Purchasing the Bond (You).
  • The Surety: Insurance Company that Issues the Bond (Pacific Surety Insurance Agency, Inc.).

Within specific industries and states, governing legislative bodies may issue requirements for particular bonds in order to legally conduct business. As your broker, or the surety, Pacific Surety Insurance Agency, Inc. strives to provide our clients, or the principal, the lowest available premiums while upholding our unmatched customer service.

Why do I need a surety bond?

Within specific industries and states, governing legislative bodies may issue requirements for particular bonds in order to legally conduct business. These bonds can entail various licenses and permits necessary for the issuing of a particular business license by state. In general, surety bonds are established to protect against fraudulent behavior and failed satisfaction of contractual obligations.

How much will my surety bond cost?

The cost of a particular surety bond is primarily dependent on the credit score (FICO Score) and financial standing of the principal, or individual purchasing the bond. Your credit score (FICO Score) is calculated by major credit reporting agencies and serves as an indication of your ability to fulfill your business related obligations and financial wherewithal to address potential situations which may result in a bond claim. Our gathering of these scores is known as a “soft hit” and does not negatively affect your credit score.

How long is my surety bond good for?

Pacific Surety Insurance Agency, Inc. offers both one and two year bond terms for the majority of our product offerings. Please visit the appropriate product page to confirm available surety bond terms by state.

How long does it take to be issued a surety bond?

Once you have decided to purchase a surety bond, agreements between yourself and the surety company must be finalized and necessary payments received. Once contracts and invoices are satisfied, Pacific Surety Insurance Agency, Inc. is then able to issue your surety bond within a matter of hours. We can also send your new bond directly to the appropriate obligee, or entity requiring the bond.

Are surety bonds a type of insurance?

No. It is a common misconception that surety bonds are a form of insurance. In fact, surety bonds work like a line of credit for the principal, not an insurance policy. Insurance policies protect the principal by transferring risk and responsibility to the insurance firm. The insurer is responsible to pay for losses or damages incurred by the insured and is not reimbursed. Surety bonds protect the obligee, not the principal, from risk. Any monies paid out by the surety to resolve claims by the obligee must be paid back by the principal to the surety.

How do I get a quote for my bond?

Our online application is the simplest way to get a quote for your surety bond. It takes approximately 5 minutes to complete, and most applicants will typically receive an approval within 1 hour.  Once completed, one of our knowledgeable underwriting staff will review your file to make sure you receive the lowest quote possible.

How is a surety bond paid for?

Surety bonds are paid on an annual or bi-annual basis, and we accept all major credit cards and checks.

How can I get a better quote?

Protecting your personal credit is the most important tool you have to improve your quote. Additional information that can help lower  your quote include your business and/or personal financial records.

Can a co-signer be used to lower my bond quote?

Yes, we have markets that accept co-signer applications. Please contact our underwriting staff for additional information.

Do you have financing available for bond purchases?

Yes.  For applicants who qualify for higher premium amounts due to bad credit or no credit, we have financing options available. Please consult our underwriting staff for the minimum amount that can be financed.

Do you pull my credit report to obtain pricing?

Yes. Our markets do a soft insurance pull through Experian to provide pricing. Soft credit pulls for insurance reasons do not appear on your credit report and should have no effect on your credit score.

What is a commercial bond?

Commercial bonds, or commercial surety bonds, comprise a broad range of bond types including License and Permit Bonds, Public Official Bonds and Court/Probate Bonds. This type of bond is typically needed by professionals in certain industries before they can obtain a business license and are required by government agencies at the state and local levels.

What is an indemnity agreement?

The indemnity agreement is the legally binding contract that ties you to the surety bond. By signing the indemnity, you agree to pay the surety company back for any monies (including legal fees) paid out to resolve claims that you have caused, and, if you cannot pay back the surety, your corporate and personal assets can be used for repayment. Indemnities are required and you cannot purchase a surety bond without signing one.

Why does my spouse have to sign the indemnity agreement?

Legally, you and your spouse share joint assets. In a worst case scenario, if you are unable to repay monies used to resolve a claim, the surety company will use your corporate and personal assets, including your shared assets, for repayment. For this reason, your spouse is required to sign the indemnity agreement.

Will the state accept a faxed or emailed copy of the bond?

Typically, government agencies will only accept the original signed and sealed bond. Please consult the obligee for specific information regarding what they require.

What if I move my company or change its name after I have purchased a bond?

Email or fax a request to our office with the new address or name, and we will issue a change rider to the bond. A new bond will not be required.

Why do I get my renewal invoice so early?

Most bond forms have cancellation clauses that require the surety to provide written notice to the obligee  30, 60 or 90 days in advance of the bonds cancellation date. We typically send out renewal invoices 90 days in advance to give you time to renew and the surety time to notify the obligee. The due date on your renewal invoice will match the bond forms cancellation clause.

What is a security bond?

Security bond is an incorrect term used in lieu of surety bond. It is typically used by individuals who are unsure what type of bond they need.

What is a surety bond agency?

Surety bond agencies, sometimes referred to as surety bond brokers,  are licensed insurance agents that are appointed by surety companies to represent them. While there are thousands of bond agents across the U.S., many of them primarily offer insurance and write surety bonds on the side (they are sometimes referred to as bond insurance agencies). At Pacific Surety Insurance Agency, Inc., we specialize in surety bonds and only work with the top A.M. Best-rated and T-listed surety companies.

What is a surety company?

Surety companies are insurance organizations that issue and financially back surety bonds. A majority of these companies also provide insurance products, which is why they are sometimes referred to as surety bond insurance companies or bond insurance companies. Surety companies use surety bond agencies to work directly with people who need bonding.

 

I highly recommend Pacific Surety. If you have any doubts as to where to get a bond, trust me when I say that you won’t have to look anywhere else for a better price or a better service.

Alejandro Covarrubias

Covarrubias Enterprises Auto Sales