FAQ

Q: What is a Surety Bond?

A: A guarantee to the obligee that the principal will fulfill an obligation or series of obligations. In the even the principal fails to do so, the obligee will recover from the surety bond. The surety, through the indemnity agreement, will expect reimbursement from the principal.

 

Q: Is there a difference in Bonding Companies?
A: Yes, every Surety has different rules, requirements and standards. Indeed, the personality of various underwriters involved needs to be taken into account. Fortunately, we represent over 30 surety companies. That is good for you. It gives you choices. Our job, is to place you with the surety that best fits your needs."

 

Q: What is the Process to obtain a bond?

A: It is similar to applying for a bank loan. It gets more complicated if you need a large bond. If you need a bond under $500,000, we might be able to get it approved with minimal information if you have clean personal credit. For larger bond programs, we will need to obtain information from you that will allow the bonding company to understand your character, ability, and financial condition. How much information do we need? Best to give us a call and we’ll try to make it as simple as can. The process can be very fast, but it’s best if you discuss the pros and cons of various options so you do what’s best for you.

 

Q: What kind of information do I need to provide in order to get a bond?
A: That often depends on the size bond that is needed. If you need a bond under $500,000 the information required is much less. Sometimes, we only need a small application completed. For larger bonds, we usually need Personal Financial Statements, Last 3 year Corporate Financial Statements, Current Work on Hand, Evidence of Borrowing Capacity, Copy of your trade license & current certificate of insurance. Have a question about any of this information? Give us a call and we'll work it out.

 

Q: What is a general indemnity agreement?
A: This is a legal document usually signed by your company and major shareholders personally, indemnifying the surety against loss they may incur because of bonds they wrote for your company. Generally, if a surety is asked to incur costs on your behalf, they will expect to be reimbursed by you. The terms and conditions of the indemnity agreement are important for you to understand. Be sure to read the indemnity agreement. If you have questions, we can probably give you insight on when certain clauses are usually invoked and how that might affect you.

 

Q: How much does it cost to get set up for bonding?
A: At Florida Surety Bonds, there are no set up, underwriting, maintenance or bid bond fee's unless charged by the surety. Sometimes, the surety will require that a contractor upgrade his financial statements to qualify for larger bonds. That investment in better quality CPA statements is sometimes considered a cost of getting set up for larger bonding programs. We can advise you on your options and possible benefits before you decide to make an investment with your CPA.

 

Q: How much do Surety Bonds Cost?
A: Premiums vary from Client to Client depending on the type of bond, quality of financials & surety company. Bid bonds are usually free. There is usually just one charge for a combined Performance & Payment Bond. Depending on circumstances, these rates can average to be less than 1% of the contract price up to about 3% of the contract price. We would be happy to review your situation and let you know what rates roughly what rates you might be able to use, and further, tell you what you could do in the future to obtain lower rates in the future.

 

Q: How do Surety Bonds Work?
A: The Performance Bond guarantees to the owner/obligee that you will perform the work as per the terms of your contract. If you do not perform, the obligee may put you default and ask the surety to remedy. The options of the surety at that point are determined by the terms in the bond and your contract. The Payment Bond guarantees that you will pay your suppliers and subcontractors as per the terms of the applicable statute or terms of the Payment Bond. Depending on the bond form, this coverage may extend to tiers below your direct suppliers or subcontractors. If these vendors make proper claim on the Payment Bond, the surety may be required to pay these vendors directly. What differentiates a surety bond from insurance is that you are required to sign an indemnity agreement that states that if the surety incurs expenses or loss as a result of providing a bond for you, they expect that you will repay the surety. The terms of the indemnity agreement and State law dictate when or how the surety might pursue repayment.

 

Q: Can I get a Quote over the phone without submitting paperwork?
A: You can usually get a very good idea of your potential bond costs by giving us a call. Generally, we’ll try to manage your expectations by informing you of what a “safe” number might be. Once we have your submission we may be able to improve on that rate for you. If rates are important to you, we would be happy to work with you to achieve the best program in terms of rates and limits for your company. We usually need a submission to achieve that for you, but we’ll work hard for you.

 

Q: What's the difference between a Bonding Company and Bonding Agency
A: The Bonding Company is the Surety. They are the ones who actually make the guarantees and promises found in the Bid, Performance, and Payment Bonds. The Bonding Agency works with you to find the best fit for the right Bonding Company. The Bonding Agency works with you to service your day to day bonding needs, helps maintain a good relationship for you with the Bonding Company, and helps solve bond problems as they arise.

 

Q: What is a Notice to Owner? Do I need to file one?
A: Florida Statutes 255.05, 713, and 337(DOT work) define who must file a Notice to Owner, when they should be filed, to whom they should be filed, how they should be delivered, and what needs to be included in the Notice to Owner. It would be absolutely foolish to attempt to provide any products or services to the construction industry in Florida without having a basic understanding of the Florida Lien Law. A Notice to Owner is the legal way to let the powers that be know that you are out there and providing services to the project. Failure to provide a timely Notice to Owner could block your ability to be paid. If you want a little more direction in this area, feel free to give us a call.