The Surety Bond Expert Advantage
Why public construction contractors need more than an insurance agent to handle bond needs
Where insurance agents fall short in an area outside of their education, experience and market knowledge, surety bond brokers are the answer. As the recognized “go to” experts that contractors need to successfully navigate the complexities embedded in the procurement of bonds, professional surety experts provide the specialized insights required to flourish in the public construction arena.
Breaking Down the Insurance/Surety Myth
While many mistakenly equate insurance with surety, the truth is surety is only regulated as an insurance product for the convenience of government oversight. Surety is NOT just another arm of insurance, like life, health or property/casualty. While insurance limits are voluntary and primarily protect the insured, i.e., the contractor, surety bonds are mandatory to protect the obligee—public entities or taxpayers.
Surety bonds require a higher level of timely service, specifically a greater attention to detail in understanding and issuing an individually tailored bond to conform to every specific project a contractor needs bonded. Surety experts know what to look for in a client’s submission in order to give them the best possible chance of qualifying for the regular and reoccurring bonds contractors need.
Surety bonds and insurance are two separate risk-management tools. The important differentiator between surety and insurance, generally speaking, is that insurance is a two-party contract and is underwritten using market conditions, whereas surety, or suretyship, is a three-party contract that is driven completely by the individual qualifications of a contractor. Furthermore, insurance losses are anticipated and spread amongst all, plus rates are calculated on class of business wherein prior losses increase a contractor’s rates only. However, in surety, a contractor’s prior losses, poor credit or inadequate financing of operations may eliminate any chance of obtaining a surety’s interest in even a minimal relationship.
Public contractors must actively seek surety bonds on short, unpredictable notice based on the varying requirements of individual projects. Contrast this to the process of shopping for a low insurance rate once a year. Surety is an active, on-going credit maintenance relationship that is best nourished and can be compared to a bank’s borrowing line of credit. Good credit and financial wherewithal are fundamental and an invaluable complement to a contractor’s character, length of experience and industry reputation. Having an experienced surety professional working to support bond needs is a critical piece of a business’s success.
So, while insurance agents represent insurance, specialized surety bond brokers represent surety needs from a truly separate industry—and the two worlds should not be conflated. Surety experts provide more options, such as more appropriate markets, superior advice, lower rates and timely service.
Choose Surety Expertise for Higher Level Service and Lower Rates
Often, insurance agents will handle a customer’s surety needs merely to support their own best interests, such as to boost client retention. But, this comes at the expense of the contractor’s best interests in many areas, such as service and rates. A contractor who performs public work construction inevitably has last-minute, time-sensitive, specialized service needs. Insurance agents are unaccustomed to such deadlines.
Who Negotiates for You?
There are more than rates to negotiate, and specialized surety brokers usually have far more experience than the surety bond company underwriters who evaluate, underwrite and judge the merits of a contractor’s qualifications—yet another compelling reason to find a qualified surety bond broker to manage these needs.
Court Is in Session: Who Represents You?
A surety bond company considers all the qualifications of a contractor. It judges acceptability, and determines rate and maximum bond capacity it is willing to extend. Whereas the bond company is the judge, the contractor’s bond representative is their lawyer in front of that judgment. The better the lawyer is in negotiating for the contractor, the better the contractor’s success will be in obtaining the most advantageous overall program—best service, best advice, lowest rates and the highest bonding capacity.
In a sense, the agent acts as a marriage broker between the contractor and a surety bond company, but only a specialized surety bond expert can best CONNECT a contractor’s needs to the most appropriate surety bond company. The larger the contractor’s bond needs, the greater the importance of THE CONNECTION.