Surety Bond Rate Going Up Here's How to Stop It
How can you guarantee, that the rate for your surety bond will stay the same upon renewal?
In many cases with struggling companies when it’s time for your bond renewal they cannot meet the surety terms for the next year. If your credit or financials have taken a hit the cost of the bond may sky rocket and they may ask for collateral. If your business can not provide the collateral or come up with the money to pay for the surety bond your bond will be revoked and the state will suspend your business license. When your license is revoked and you can’t operate your business the company usually folds.
So how can you prevent this when the rate of the surety bond is determined by your credit and financial statements? Many speculators are predicting that many businesses will no longer qualify for the surety bond due to credit next year. They are also speculating that the cost of surety bonds will rise due to the influx of claims. Also worth noting many surety companies will no longer write certain types of bonds. IF this happens which it has been happening slowly will eliminate competition and cause fewer companies to shop rates too.
There are a few things that you can do to lock your surety rate in which are:
Don’t buy a one year bond buy your surety bond for a two year term or three years if you can.
There are a few benefits for this the first one is that you will not have to provide updated paperwork the following year or until your bond is up for renewal. The second advantage is that you will get a discount for each extra year you buy your bond for. The savings on the premium should be anywhere from 10% to 15% for the second years term. Example if the premium is $250 for the first year the second year’s premium would be $212.50. Remember by buying your bond for more than one year will not only save you money it will also lock your rate in so you are not subject to the premium rising do to bond type or your financial situation. So next time your surety bond is coming up for renewal or you’re in need a surety bond ask for additional quotes to extend your bond term
I hope this has provided some insight on this matter
