How To Save Money on Contractor Bonds

I have sold many contractors bonds over the years and I feel that there is a big misconception about what drives bond prices for contractors. I know everyday that I am going to get the question, "why is that so much higher than what my friends are paying?" Sometimes I have to explain to a construction business owner what drives the price of a bond and how they can lower that dollar cost and reduce/eliminate time spent searching aimlessly. Here is a quick article about getting your contractors bond, either a license or performance bond as cheaply as possible.

Here are a few points to remember when shopping for a contractors bond.

Steps In the Process
1. Check Your Credit Before Shopping-The insurance agent on the other end of the line has many different surety companies that can write bonds. Knowing that you have perfect, less than perfect credit, or even poor credit can determine which application for what surety company quickly. Respect your insurance agents time on the phone. Example-Inaccurate information on your credit report that could double the price of your bond then find out later that you could have paid a parking ticket and received the standard rate.
2. Shop 30 Days in Advance. Allow the insurance agent to find which company is going to charge the least amount. Also save money on postage-having a few extra days can reduce the price of mailing the bond. If you don't have to pay $36 for overnight shipping every year because you got it done a month in advance. You will save money and reduce your stress.
3. Get your bond file together. Start a file on your computer or a paper file. Use your taxes, bank statements, irrevocable letters of credit from your bank or credit union to start your file. Ask your agent about "anything else she/he may need to get this bond approved." Having an up-to-date resume with project examples also makes underwriters feel "warm and fuzzy" because they know that this $600,000 car wash project is not only one of your average projects but it is something that you excel at as you have built 32 other car washes in the past 12 years.
3. Have a good relationship with your bond company. Having a long term relationship with your sutety company will improve the ability to get bonds approved. Sometimes surety companies pass because the bond is needed is so last minute. On large scale projects having been a past performance bond, current/past license bonds, and having been prequalified for your bonding capacity will allow you to get your bond approved THAT DAY! You are finalizing/submitting your bid while your competitors are shopping for a bond.
4. Don't make them pay out if possible. Everyone gets a complaint. It's part of the construction world. The last thing that you want to do is have a bond company pay a surety claim. Not only will the new bond companies decline, your current one could take a pass on writing your bond if you avoided correcting the issue in the first place. Example: Contact your agent about filing an insurance claim instead of dodging phone calls for three weeks from a customer about a leaky shower drain.

In closing for you to get the best price for your bond you need to check your credit, shop 30 days in advance, get your bond file together, establish a relationship with your bond company, and take care of complaints before they reach the point where the state files a bond claim against the surety.

Cautionary Note:
Don't over shop your bond. This WILL DAMAGE your credit! There are many agencies that write bonds and few surety companies.

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