You likely provide surety bonds for a variety of different businesses and industries. As a result, it is your responsibility to accurately cover the bond owner. If you fail to issue the correct bond, you could expose the bonded entity to financial risks.
Therefore, you need to guide clients in choosing the correct bonds. A variety of industries need bonded services, especially contractors. Contractors legally guarantee their own clients that they will provide certain services. Surety bonds can help a contractor compensate a client in the event the contractor can’t deliver on promised work.
Before you issue a bond, walk through the bonding process with a contractor. Keep the following aspects in mind to make sure you issue the correct bond.
1. Consider the industry
Unique industries face a variety of problems when completing contracts. Therefore, you will often issue different bonds to different industries. Make sure that you only issue bonds for the industry in question. That way, the bond will cover services without exposing clients to loopholes.
2. Issue the appropriate type of coverage in the bond.
The law and individual clients may require contractors to buy certain coverage. Bonds may need certain dollar amounts or entailed responsibilities to satisfy contracts. Make sure that your bonds will cover the cost risks associated with a certain project.
3. Meet the client and contractor’s requirements
Surety bonds vary in how they compensate clients. Explain to contractors the type of compensation that any given bond will offer. This way, the contractor will know his or her responsibility to the client.
Bonds may cover:
· Payment: These bonds guarantee that a contractor will compensate suppliers and subcontractors under the contract. This can free clients from liabilities resulting from contractor payment negligence.
· Performance: Clients want the work done according to their specifications. Performance bonds essentially guarantee that the contractor will complete the work according to the contract.
· Supply: If a contractor can’t deliver because of missing materials or information, this coverage can help compensate the client for lost time and money.
A general type of bond, called an ancillary bond, can sometimes cover obligations that aren’t related to performance. Speak to your clients about their contractual obligations. Then issue a bond according to the constraints of a contract.
These are just a few of the services that surety bonds can cover. They can often become much more specific. Your objective as a bond writer should be to cover all the services that a client aims to provide. This may mean issuing more than one bond. However, by listening to your client, you can issue the correct pieces of coverage.
A-Best Insurance can help you get a surety bond package to serve a variety of industries. Call us at 713-681-1967 or fill out our contact form for more information.