If you’re a licensed professional, contractor, or business seeking to work on a government project, you’ll likely need to purchase surety bonds throughout your career. Learn where surety bonds come from and the best companies to work with when you need to obtain one.
Who provides surety bonds?
Here are the three main entities that provide surety bonds.
1. Surety Companies
A surety bond company is an insurance company/carrier that underwrites and issues surety bonds. Surety companies form contracts with agencies (like ZipBonds.com and other direct surety providers). These agencies then represent the surety company by advertising and selling surety bonds and working directly with buyers.
Generally, surety companies don’t deal directly with customers. They are, however, part of the three-party surety bond agreement:
- The principal (buys the bond)
- The obligee (requests the bond)
- The surety company (issues the bond)
When choosing a surety company, ensure they check every box in this list.
- Reputable: Learn how long the company has been in business. Read third-party reviews online to learn about the company’s reputation for helping other businesses like yours. You can check out websites like the Better Business Bureau and Yelp, along with Google and Facebook reviews.
- Financially sound: Ask your agent to provide the company’s A.M. Best rating. “A” means the surety company has an excellent insurance company credit rating. “A++” is the highest possible rating a business can earn.
- Authorized and licensed to sell bonds in your state: Ensure the company is licensed and certified to sell surety bonds in your state. You can use the U.S. Department of Treasury website to search for certified companies.
- Offers suitable types of bonds: Make sure the company provides the specific bonds and coverage amounts you need. Every surety company has a maximum surety capacity.
- Expertise: Look for a surety company with expertise in your specific industry. Here’s a list of the top 100 surety bond writers in the United States and Canada: The Surety and Fidelity Association of America (SFAA).
2. Direct Surety Providers
Direct surety providers, or surety brokers, are licensed and appointed to sell surety from multiple surety bond companies. When you contact an agency to purchase your surety bond, you’ll typically work with a surety broker or independent insurance agent.
Direct brokers – like Zip Bonds – are hyper-focused on all types of surety. They can help provide you with the best options and rates available and offer the expertise that other “non-specialists” (like many insurance agents) cannot. A surety agent can also walk you through the entire process of purchasing and issuing your bond. They will also act as your representative, working directly with the surety company for you, in your best interest.
Consider working with a direct broker to avoid common mistakes and pitfalls general insurance providers may face regarding surety bonds requirements, eligibility, and underwriting. Surety agencies may also have access to surety companies that general insurance agents do not, which can give you a more comprehensive range of options.
To find a reputable and experienced surety bonding agency, find answers to these questions:
- How many surety companies does the agency represent?
- Does your agent specialize in surety?
- Does your agent handle similar accounts in your industry? Do they have in-depth knowledge of your industry?
- Does the agency have a good relationship with local lawyers, bankers, and CPAs who specialize in your industry?
3. Independent Insurance Agent Providers
An independent insurance agent sells insurance policies from various carriers. They aren’t employed by specific insurance agencies (like Geico, Nationwide, etc.). Instead, they form partnerships with different carriers and can sell insurance policies from those companies directly to customers. Independent agents earn a commission for the policies they sell.
Some independent agents provide surety in addition to insurance. If you’re looking for a surety provider with local expertise and commercial insurance options, partnering with an independent agent could be a smart option.
Keep in mind, however, that just because an independent agent sells surety doesn’t mean they should. Ensure they have expert knowledge and experience in surety before choosing to work with a local independent insurance agent provider.
How to Get a Surety Bond
Obtaining a surety bond can be straightforward and simple – if the business you’re working with is experienced. You can work with either an independent insurance agent that specializes in surety or a surety broker. You’ll fill out an application, provide any necessary documentation, and pay a premium for the bond once your application is approved.
Get a Surety Bond Quote from ZipBonds.com
Zip Bonds is hyper-focused on all types of surety and can provide the knowledge and expertise you won’t find with general insurance agents. Let us know if you’d like to receive some quotes for specific bonds. We’ll impartially shop multiple surety companies to find you the right coverage at the best price.