Bonds
CONTRACT BONDS
Contract surety bonds include bid, performance and payment bonds. Basic Underwriting requirements are: Bonds up to $350,000 are based on your credit score and other information reported; simply by providing your and your spouse’s social security numbers.
To obtain the best rates for contracts over $350,000:
- Last three year-end business financial statements.
- If yours is a new venture a start up balance sheet will be required. This will provide the underwriters with your investment of CAPITAL.
- For bonds approaching or exceeding $1,000,000 a CPA Review statement is mandatory.
- Regardless of how you want to handle your tax reporting, it is important to choose the percentage of completion method of accounting for preparing your operating financial statement with a schedule of work-in-process at year-end.
- Bank Letter from your banker setting up a line of credit. The larger the bonding program the larger the line of credit should be. The line of credit assures you of adequate cash flow and also serves as a credit reference.
- Resumes of the principals and their key employees, provides the CAPABILITY.
- References from owners, engineers/architects and suppliers also show
CAPABILITY. - Personal financial statements of the principal owners are required annually. These can be self prepared or on your bank’s form.
- Included within the underwriting process is the necessity to demonstrate CHARACTER, which is probably the most important of the three “C’s” of surety underwriting.
COMMERCIAL BONDS
- License & Permit
- Public Official
- Fiduciary
- Court
- Miscellaneous
These bonds are easily underwritten, however it must be noted that for a bond over $25,000, a personal financial statement may be required.
FIDELITY & CRIME COVERAGES
Employee dishonesty insurance is one of the most over looked insurance coverages in the business world.
- Individual Fidelity Bonds
Frequently required by employers of their bookkeepers – civic treasurers, etc. - Position Fidelity Bonds
This form names the position to be covered rather than the individual. - Name Schedule Bonds
Here the individuals are specifically named. - Blanket Fidelity Bonds
This is the most popular – charging for a minimum of five employees.
Crime Coverages
- Theft is that act of taking property without any evidence of breaking and entering.
- Burglary is the act of breaking and entering.
- Robbery the act of taking via threat of bodily harm.
- With these crime coverages we can also add, Forgery and Counterfeit.