Today, we are going to talk about things that you want to be asking your bonding agent. Most people, who are in a situation where they’re applying for a bond, are worried about qualifying for the bond and obtaining the bond. What if you’re able to obtain a bond and what if you’re able to qualify? What are the questions you should be asking?
How are surety bond premiums (fee for the bond) determined? Surety Bond premiums are determined in different ways for different types of bonds. Some bonds defer to the rates filed by the surety and that is how the price is determined. Other bonds have a large flexibility in their filed rates to reflect higher risks associated with certain types of surety bond obligations. These surety bond premiums are commonly priced based on the risk associated with the surety bond or are risk-based.
Is the bond premium an annual expense or a one-time expense? Every surety bond agency or broker that you deal with uses various surety companies that have different procedures and processes. Certain bonds are paid annually, while other bonds only have a one-time bond premium. An important question is whether or not the bond premium is paid annually or is a one-time expense.
How do I cancel a bond? There are some bonds that continue until a court case is over. Bonds for licenses cover the license term. You want to be asking your bonding company about this.
I’ve seen companies that may require accounting for an estate matter, whereas other companies would just receive a release and receipt of the distributive shares and fiduciary fees. What’s the difference? Well, if it ends up costing you thousands of dollars to get a cancellation so that the bond can be canceled for the surety, that’s going to factor into the cost, right? So, if you’re going to have, let’s say, a higher bond premium to have a lower level of cancellation, it may make sense. So, the bond premium: although one company may have a higher rate than another, that doesn’t always tell the full story.
Another thing you want to keep in mind is if your company has incorrectly issued a bond several times. This results in wasting your time going back and forth between the bonding company and the court or wherever you are filing the bond.
Another factor that doesn’t get considered is the amount of time and the ease of use in dealing with a surety bond agency to obtain the bond. I would always suggest speaking with an expert. Have your question(s) lined up before you contact them, and work with somebody willing to respond when you have questions.
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