Investing in a surety bond is a wise decision. These bonds provide your customers with the confidence they need to work with you. Bonds provide compensation to the customer should you fail to deliver as promised.
Some companies fail to get bonds because they are unsure of the cost. The good news is you do not have to pay the full value of the bond upfront. This means obtaining a bond is not hard to do or too costly for most companies.
How Much of the Bond Does the Company Pay?
Each bond issuer establishes rules on how much of the bond value the company must pay at the time of obtaining it. Generally, you will pay a specific percentage of the total bond value. Many factors play a role in what that percentage is. Most of the time, the company’s financial strength determines this cost.
A company that has ample experience and financial health has its benefits. For example, a new company without a proven track record is a higher risk to the insurer. It costs more to obtain a bond as a new company. Otherwise, a company with sizable financial assets and experience will be less risk. This means they will likely pay a lower percentage of the value.
How to Obtain the Cost of a Bond
To determine the cost of the surety bond to you, consider the following steps:
- Determine the value of the project. The bond value will be set on the total value of the project. This protects the property owner up to that amount.
- Work with a bond insurer to determine your qualifications for obtaining a low-percentage bond. Provide financial documentation to prove your company is financially stable.
- Ask for the best available price. Don’t be afraid to ask your insurer for the best percentage and upfront payment.
The full bond value is always made available to the property owner should the project fail. If it does fail, under the specific terms of the project, the owner can file a claim. As the business owner, you will still be responsible for those financial losses. You’ll repay the bond issuer in the amount they pay to the property owner.
Working with a business insurance company to safeguard your investments is essential. Kentucky bonds are a part of that process. Call First Insurance Group today at (800) 511-2892 for more information.