A little while ago the average surety bond amount was $10,000, but in this tough economy the states have increased the surety bond amounts as well as adding additional bonding requirements. The average surety bond amount is now around $25,000, you still can find surety bonds around under $10,000, but it all depends on what the state, federal government or city requires for your license.
If you consider you need a net worth of $40,000 to qualify for a $10,000 bond and now you need a $100,000 net worth to qualify for a $25,000 bond can make it harder for you to stay in business.
This is not the only problem new and existing business are now facing. Underwriting by the surety companies have tightened and many companies are now shying away from certain types of risks. Many sureties have completely stopped writing certain types of bonds too. So why are sureties tightening their belts? Why states are States increasing bond amounts?
The reason why the surety companies are tightening their belts is the same reason why the states have increased the bond amounts, fraud. Fraud has made surety companies reevaluate their book of business, but fraud is not the only reason. Many financial guarantee bonds are now being claimed upon such as utility bonds and sales tax bonds. To counter the claim ratio surety companies are now increase rates or they are non-renewing these types of risks. The amount of premium VS the amount of money that is needed to take the client to court has become unprofitable in a hard market.
So what do you do?
Bypass the surety completely and find a bonding agent that has set up bonding programs designed to help clients with bad credit, weak financials or hazardous bond types. Look for an agent that has the power of the pen.
Check your credit before you apply for the bond so you know what your up against.
By James Clapton