Secrets of Bonding 150: Bonds Are Exactly Like Insurance
By [http://EzineArticles.com/expert/Steven_Golia/152522]Steven Golia
If you are a follower of the Secrets blog, this statement may surprise you.
Go all the way back, way back to article #1 in this series published in February 2014. It was titled "Bonds Are Not Insurance." OK, so when did they start being like insurance?
Does this sound familiar?
Your contractor client calls up and tells you they have just won a new contract and are ready to sign. "We need to provide an Insurance Certificate."
What would be your very next comment? Would you say you will transfer the call to Bertha who issues the certificates? Or would you ask for a copy of the insurance specification and the new contract so you can review?
You'd probably do the latter. You need this to determine if there are any special requirements, onerous clauses and to determine the coverage levels needed. Before issuing the certificate, you may need to modify their program to be compliant.
Let's compare this to Surety Bonds. When an agent colleague sends over a bond request form (or bond app), we always ask for the written bonding requirements, any mandatory bond forms and a copy of the contract if it is available.
We do this for exactly the same reason as with insurance. We want to understand what the customer needs, and be sure what we provide fulfills the requirements. It's just good business.
Admittedly, bonds are still very different from insurance - except for this common underwriting step. You agree?
Now let's go a step deeper. If we will always review these supporting documents to accompany each bond request, what are we looking for when we get them? What are the hot buttons?
It is important to note if bond forms are included in the specification. If they are, you must determine if they are mandatory to use, or if equivalent or standard forms may also be accepted.
In contract surety, all bid bonds are pretty much the same. However, Performance and Payment bonds can vary great depending on the obligee (protected party).
For example, on all federal projects, the bond forms are the same, and using them is mandatory.
The American Institute of Architects (AIA) has developed a standard set of bond forms that are well accepted by all parties and commonly used in construction. You may find these are stipulated.
When it comes to private contracts, such as a subcontractor working for a general contractor, the bond forms can be anything. It might say AIA forms, or they might invent their own P&P bond form that is mandatory. You need to know!
The standard for the bonding company could be as simple as "the surety must be acceptable to the obligee."
However, there can also be licensing and rating requirements that must be adhered to. A license issued by the local state insurance department could be required "a bonding company authorized to do business in New Jersey."
A minimum size and strength rating from a rating bureau like A.M. Best could be indicated.
Along similar lines, a surety listed on Circular 570 (a federal approval list) is not uncommon.
There is way to assure your client has exactly what they need other than to review the requirements. Failure to provide exactly what a client needs can lead to embarrassment, loss of a contract and one disappointed "former" customer.
Bonds are NOT exactly like insurance, but the underwriting has some common elements, namely the need for certainly when providing the correct coverage issued by an appropriate carrier. Get the supporting documents and read them. Discussion with the client and underwriter may be appropriate.
In both bonds and insurance, this procedure protects your E&O, assures your professional performance and leads to stronger client relations.
Steve Golia is an experienced provider of bid and performance bonds for contractors. For more than 30 years he has specialized in solving bond problems for contractors, and helping them when others failed.
The experts at Bonding Pros have the underwriting talent and market access you need. This is coupled with spectacular service and great accessibility.
Contact us today and discuss how you start a new bonding relationship for your company, or increase your current bonding capacity. Call 856-304-7348.
Visit us [http://www.bondingpros.com]Click!
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Article Source: [http://EzineArticles.com/?Secrets-of-Bonding-150:-Bonds-Are-Exactly-Like-Insurance&id=9724716] Secrets of Bonding 150: Bonds Are Exactly Like