Surety insurance gives a business credibility by showing the client you are able to meet your obligations. Surety insurance or bonds can be written for almost any purpose, including financial purposes. For example, a janitorial company that cleans a bank must be bonded in case any money or assets go missing while the janitorial staff is cleaning the institution.

Choosing the most appropriate surety insurance and understanding the insurance contract means you must be familiar with all the surety insurance basics. Consider the following suggestions to help you:

1. Determine the type of surety insurance your company needs.

2. Make sure you understand the surety insurance lingo.

3. Familiarize yourself with endorsements and industry specific options for surety insurance coverage.

Action Steps
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Learn about the types of surety insurance

Before you purchase surety bond insurance, it is important that you understand the specifics of both types of insurance. Contract surety bonds are usually used by construction companies to guarantee the quality and timeliness of a job. Commercial bonds are used by numerous types of companies, including cleaning services, to guarantee that certain obligations will be met.

I recommend: Safeco Insurance offers lists of the most common surety insurance for different industries to ensure your business has all its needs met. You can find information about the different types of surety insurance at Surety Information Office.

Understand surety bond insurance terminology

When talking with a surety insurance company representative, you may find that you don't fully understand some of the terminology regarding the coverage. Prior to contacting surety insurers, you should familiarize yourself with terms like capacity, which is used to describe the amount of a bond a surety can guarantee, or penalty, which is the limit placed on the bond.

I recommend: You can find a list of common surety insurance terminology, including surety life insurance terms and surety title insurance terms at Surety Title. CNA Surety offers a glossary of terms used by surety insurance companies, including a surety life insurance company.

Understand specialty surety insurance

Once you begin to get quotes for your surety insurance, you may find that you have to decide on specific endorsements or special types of bonds that fall in your industry options. Understanding these options before signing a bond is vital to ensure that you have the coverage needed.

I recommend: Surety Title Agency offers a list of endorsements with detailed explanations. This company offers the information in plain text on the website or you can click on the link to download the information and samples in PDF format. Worldwide Insurance Specialists offers a blog that has detailed information about some of the most common types of specialty surety insurance, including financial surety insurance.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Surety insurance carriers must be licensed by the state in which you live. Before doing business with any company, get referrals from other businesses in your area and verify that the surety insurance company has a valid, current license in your state.

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.

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Look for a reputable surety insurance company

Look 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.

I recommend: South Coast Surety offers surety insurance in all 50 states. Surety1 is another reputable surety insurance company. The 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 task

There 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.

I recommend: Safeco is a nation-wide surety insurance company that underwrites everything from construction projects to wall street ventures. The Century Surety Group is another nation-wide company with an outstanding reputation.

Get a surety insurance company to underwrite you

Once 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.

I recommend: Mountain High Surety, Inc. can help you understand the basics of surety underwriting. The Insco Dico Group can also walk you through this process.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  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.

Staying up to date on surety insurance news and trends can prove to be a full time job but, when your company has to have the insurance, it may be necessary to stay current on the issues. Although some surety insurance agencies will alert you when things change, it is a good idea to get information on your own so you can have unbiased information to base your decision about coverage on.

Prior to updating your current coverage or purchasing new surety bond insurance, consider the following suggestions:

1. Find out the current surety insurance news.

2. Know the special requirements for surety title insurance.

3. Learn about special surety considerations.

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Know the latest surety insurance news

Regulations and coverage requirements for surety insurance change often. Staying up to date on these changes ensures that you will have the coverage you need to do business in your state. Keep in mind that some regulations are set by the Federal government, so you must also find out about those issues.

I recommend: The Surety & Fidelity Association of America offers information about the surety insurance industry. While some of the information is available to the public, more detailed information is available to members. The Surety Information Office offers reports about the latest happenings in the surety insurance industry, including updates for state specific and national rulings and standards. Grant Thornton produces a well-regarded survey of the construction surety credit business. McGraw-Hill's Engineering News-Record covers breaking news on surety guarantees.

Keep current on the special requirements for title surety insurance

Title surety insurance has some special considerations. For example, you have to know the full history of titles on a property prior to getting surety insurance on it. In some cases, you may need special paperwork filled out by previous owners to secure the insurance. Because these requirements change periodically, you must check often to ensure you know the most up to date information.

I recommend: Surety Title explains what points you should consider when looking for title surety insurers. This company also offers a detailed surety insurance glossary on the Resources page to help you understand the terminology used in the paperwork. Surety 1031 Exchange offers up to date forms needed to successfully obtain surety title insurance such as exchange agreements and assignment notices.

Stay up to date on special surety insurance issues

Some types of special surety insurance, such as Federal surety insurance and surety life insurance, have their own special considerations. Knowing the current issues for surety insurance can be especially difficult if you have to rely upon multiple surety insurance companies that you have policies with, such as a financial surety insurance provider and a surety life insurance company.

I recommend: You can find videos at Safeco Insurance that can help you to choose the most appropriate insurance coverage. This company even offers a video to help businesses who must temporarily close the doors due to unforeseen circumstances such as a natural disaster or sudden illness. Brunswick offers information about the advantages of surety insurance over other types of insurance. This company also offers detailed explanations of each type of insurance on the web page dedicated to that specific type of bond.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Anytime you discover you need to update your surety insurance, check with your state's Department of Insurance to verify that your current surety insurance company still has a valid license in your state.

There are various degrees to which surety insurance may be used to protect businesses. In the most popular and common form of surety insurance, the insurance works to prove that businesses are able to meet their obligations. Such policies can be written for almost any purpose or obligation, including those based in finances. As such, it is important for businesses to choose the most appropriate form of surety insurance and in order to do so, you need to understand surety insurance key terms and concepts that pop up in the industry and within surety insurance policies.

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Conservator

A conservator is the person, individual or entity who is utilized to act as the protector of the interest of an incompetent potential policy holder or a minor. They are designated to the position.

I recommend: The importance of a conservator to purchase a surety insurance bond is explored at Tripod.com.

Funds control

Funds control is a method through which the cash flow of a project is controlled. In many cases, funds control is implemented in order to ensure that subcontractors and suppliers will be paid appropriately. Most often, funds control is used when a contractor is otherwise unable to qualify for a bond.

I recommend: Funds control as it may be required for surety insurance is explored at RKABonds.com, as well as other surety insurance frequently asked questions.

Treasury listing

Treasury listing is an official financial rating. It is published by the federal government. The treasury listing illustrates the maximum size of a federal bond that a surety is permitted or authorized to write. Treasury listing may also be referred to as the t-list.

I recommend: An explanation of the treasury listing and how to obtain a copy is disclosed at Sio.org.

Small Business Administration

SBA stands for Small Business Administration. The Small Business Administration offers a program designed to assist small businesses and minority-owned contracting companies in the acquiring of their surety bonds.

I recommend: An in-depth analysis of the SBA raising the surety insurance bond ceiling is presented at BizJournals.com.

Errors and omissions insurance

The errors and omissions insurance policy is put in place in order to provide coverage for businesses in the event of unintentional errors, omissions or other mistakes. It is commonly referred to as E&O.

I recommend: Additional information on errors and omissions insurance as a part of surety insurance is discussed at CNASurety.com.

Fiduciary

A fiduciary is an appointed individual who is hired to act in the best interest of another individual. They handle the affairs of those who are unable to handle their own affairs. In many instances, fiduciaries are requested in order to furnish a bond which would be implemented to protect against failing performances of their duties.

I recommend: Fiduciaries and fiduciary bonds are discussed in detail at JWSuretyBonds.com and BozzutoInsurance.com.