There are many professionals who are routinely required to have surety bonds when starting projects. While these bonds are a fairly routine part of these industries, those that are new to their line of work might have a limited or incorrect understanding when it concerns these bonds.
Myth: A Surety Bond Works Just Like A Standard Insurance Policy
Individuals that are needing to purchase their first surety bond may assume that these bonds will function similarly to traditional insurance. However, this is not the case, as the bond issuer will only cover the costs of claims as a last resort. Rather, you will be expected to pay for the costs of any claims that are submitted and validated against your work. The bond issuer simply acts as a backer. In the event that you are unable to pay for the damages that occurred, your bond issuer will likely take actions against you to collect the money that was paid out on the claim. For this reason, you should verify that you would be able to pay the entire cost of the bond. While this may seem like an inconvenient amount of capital to need, it can be essential for acting as professional and protecting both your client and the bond issuer.
Myth: Your Professional Work History Is All That Is Considered When A Surety Bond Is Issued
In order to have a bond issued, you will be required to pay a fee to the issuer. While this may not be surprising, many professionals may not be aware of the factors that will determine the cost of having the bond issued. Often, people will assume that a person's work history is the only thing considered. While it is true that the bond issuer may consider any formal complaints or professional lawsuits against you, it is important to understand that a surety bond is essentially a financial tool. To accurately gauge the risk of issuing the bond, the insurer may need to review your credit history.
Obtaining your first surety bond can be an intimidating process. While you may be nervous or somewhat overwhelmed by this process, having accurate information about surety bonds is essential for making sound choices. To be precise, appreciating that a surety bond is not a traditional form of insurance as well as the factors that may be reviewed before issuing this bond will provide you with much-needed clarity when using a surety bond service for the first time. For more information on surety bonds, contact a company like NFP, P & C, Inc.