Would you go to your dentist to treat your hernia? How about have your auto mechanic fix your home furnace? Of course not, yet many people still go to their P&C agent to obtain a surety bond. Surety Bonds, while underwritten by insurance companies, are not, for all intents and purposes, an insurance product. According to cnasurety.com,
“Insurance is a risk-sharing device. It assumes that there will be losses. The expected losses are calculated by actuaries. These losses, coupled with anticipated overhead and other expenses, form the basis for the premium. Surety is not actuarial rated as is insurance. Both insurance and surety call their fee a “premium.” The surety’s premium is as much a service charge as a conventional premium, which is determined on the
basis of actual or anticipated losses. It is based largely on the cost of investigating the applicant and handling the transaction.”
Never the less, most business insurance agents have access to a surety market or two and they try to obtain the bonds requested by clients. Almost every day our agency (a surety only agency) has a request for a bond from a company or individual where the insurance agent had totally dropped the ball. The story usually goes something like this: “my insurance agent has been stringing me along for over two weeks and now if I don’t get this bond by tomorrow at 5, I will lose the job, or I will have to start the license process over again.” It then becomes our job to try and “get that toothpaste back in the tube.”
When you need a surety bond, go to a surety bond specialist. Ask how many surety markets they represent (we represent 18) so that you know the agent has access to several different underwriters. Surety is a simple product, there are only five or six rules to follow. It gets tricky because there are thousands of exceptions to those five or six rules. A specialist in surety bonding is your best bet when you need a bond.