Bond Is Exactly Like Insurance

Bond like insurance- If you're a follower of the Secrets blog, this statement can surprise you.
Go all of the way back, back to post #1 in this series published in February 2014.  It was titled"Bonds aren't Insurance."  So when did they begin being like insurance?

Does this sound familiar?

Your builder customer calls up and tells you they have won a new contract and are prepared to sign.  "We will need to provide an Insurance Certificate."

What are your very next comment?  Would you state the call will be transferred by you ?  Or would you ask for a copy of the insurance policy specification along with the contract so you can review?
You'd likely do the latter.  You want this also to ascertain the coverage levels required and to decide if there are any particular requirements.  Before issuing the certificate, you may want to alter their program to be more compliant.

Let us compare this to Surety Bonds.  As soon as an agent colleague sends within a bail petition form (or bond app), we always request the written bonding requirements, any compulsory bond forms along with a copy of the contract if it is accessible.

We do this for exactly the exact same reason as with insurance.  Make sure that which we provide fulfills the requirements, and we want to know what the client needs.  It is just good business.
Admittedly, bonds are still quite different from insurance -- except with this frequent underwriting step.  You agree?

Now let's go a step deeper.  What exactly are we looking for when we buy them if we will always review these documents to follow every bond petition?  What are the hot buttons?

Bond Types

It is important to notice if bond forms have been contained in the specification.  If they're, you must ascertain if they're required to utilize, or if standard or equivalent types may also be accepted.
In contract surety, all bid bonds are pretty much exactly the same.  But, Performance and Payment bonds may vary great based on the obligee (protected celebration ).
By way of instance, on all national jobs, the bond types will be the same, and using them is mandatory.

The American Institute of Architects (AIA) has developed a standard set of bond forms that are well accepted by all parties and commonly used in construction.  You may find these are stipulated.
When it comes to private contracts, including a subcontractor working for a general contractor, the bond forms can be anything.  It may say AIA forms, or they may invent their own P&P bond form that's mandatory.  You want to know!

Surety Credentials

The benchmark for your bonding company could be as straightforward as"the surety must be acceptable to the oblige."

But, there may also be licensing and evaluation requirements that must be adhered to.  A license issued by the local state insurance division could be demanded"a bonding company authorized to do business in New Jersey."

A minimal dimensions and strength rating in the rating bureau like A.M. Best might be signaled.
Along similar lines, a surety recorded on Circular 570 (a national approval list) isn't uncommon.

Conclusion

There is way to guarantee your customer has exactly what they want other than to examine the prerequisites.  Attempting to supply exactly what a customer needs can lead to humiliation, loss of a contract and one frustrated"former" client.

Bonds aren't just such as insurance, but the underwriting has some shared components, namely the demand for certainly when providing the correct coverage issued by an appropriate carrier.  Get the documents and examine them.  Talk with underwriter and the client may be appropriate.
In both bonds and insurance, this process protects your E&O, assures your professional performance and leads to more powerful customer relations.