Posts Tagged ‘surety’

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Tax Bonds are Surety Bonds

Wednesday, April 7th, 2010

After April 15, your business may need a tax bond. A tax bond is a surety bond that is usually required by the State. Some of these bonds are needed the day you start your business others expire at the end of the year.  The majority of tax bonds are required for retail businesses guaranteeing the payment of sales taxes to the obligee.

Different types of tax bonds

Tax Bonds for restaurants :

There are many different types of tax bonds.  Some tax bonds are required for restaurants or bars to guarantee the payment of alcohol taxes. These bonds are also known as liquor bonds and alcohol bonds.

Penalty Bonds :

Some tax bonds are considered penalty bonds because your business was late on paying it’s  taxes.

Sales Tax Bonds :

The bond amount for Sales tax bonds is either based off your projected gross income or the bond amount is already preset by the obligee. There are even Tax Bonds required by contractors to guarantee that your will pay your taxes on the materials your purchased wholesale.

How much does a Tax Bond Cost?

The cost of the surety bond can vary depending on the bond language, credit, financial stability and the State.

What to do if you need this Surety Bond?

The first thing that the surety will need is an application.  Filling out the application should take five minutes or less.  The surety will review your credit, financial stability to determine surety credit.   After the application is completed you should receive an approval within the same day or the following day.

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Florida MVD Surety Bond April 30

Tuesday, April 6th, 2010

Florida MVD bonds expire April 30 of ever year.

What is A Florida MVD Bond?

A MVD is a surety bond. Surety bonds are required to fulfill a licensing requirement or financial obligation. Bonds protect the obligee,  from fraud, breach of contract and in some cases certain payments. Check your state Statutes referenced in your Surety Bond form to see what applies to you.

Who is requiring the Bond?

Florida MVD Bonds are required by The State of Florida department of Highway Safety and Motor Vehicles. This is the Obligee. A Obligee is the  one that is requiring the bond.  The Principal is the person or the business applying for the surety bond.

What does it do?

Taken from the Florida bond form

“WHEREAS, such bond shall be in favor of any person in a retail or wholesale transaction who shall suffer any loss as a result of any violation of the conditions herein above contained. NOW, THEREFORE, if the above named principal shall fully comply with the conditions of any written contract made by him as such dealer in connection with the sale or exchange of any motor vehicles, and shall pay or cause to be paid to any person in a retail or wholesale transaction any loss or damages which such person shall sustain as a result of any failure to comply with the conditions of any written contract made by such dealer in connection with the sale or exchange of any motor vehicle or as a result of any violation of the provisions of Chapter 319 or 320, Florida Statutes, in the conduct of the business of which he is licensed, then this obligation shall be void, otherwise to remain in full force and effect.

Basically if you violate the law the damaged party can file a claim and recoup their loses.

What happens if you have a claim?

If you have a claim and the surety pays out you must pay back the surety for the lose.

Surety bonds are underwritten similar to a loan. The surety reviews your credit and financials to determine surety credit.

How much do Surety Bonds cost?

Surety bonds for these bonds can start at 1% for good credit and qualifying assets. For clients that have issues rates can be anywhere from 3% to 20%.

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Is it worth it to get a surety bond

Thursday, April 1st, 2010

There are bond alternates, but are they as good as a surety bond.

First alternate instead of paying for a surety bond you could post 100% collateral with the obligee if they allow it.  Some obligee accept a cashiers check or a ILOC. A ILOC stands for irrevocable letter of credit. The obligee may provide sample verbiage of how they want it to be written or you bank has a sample form all ready drafted. If you decide to obtain a ILOC the bank normally will want the ILOC to be secured by assets or cash.   Banks also charge a fee for providing these services. The prices for a ILOC is around the same price for a surety bond.

The problem with collateral  is that it may take you several years before the collateral is returned to you. The obligee normally will not release the collateral until your business has been released of all liability. Keep in mind that there is no statute of limitations on fraud. From what I have been told from customers it takes on average of 3 years with some obliges to release your collateral. I  once had a client that took 6 years for to get his collateral back. He had to jump though several hopes before they would even consider  returning his money back to him. The obligee required for the client to obtain a surety bond and have the surety write a letter stating that they would consume all past liability. With the way the market is today I don’t see a surety doing that again.

In this economic climate I would rather pay a small premium rather then tying up $10,000 or $25,000 of my working capitol.

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Do surety companies perform background checks?

Thursday, April 1st, 2010

Do surety companies perform background checks?

Many people call and ask if I get a fidelity bond will the surety perform a background check on my new hires? The answer is no. You would think that it would be in the surety’s best interest to do so, but the cost would outweigh the premium.

Some surety companies’ offer discounted services for using companies they recommend for background checks.

A Fidelity bond is more of an insurance policy than a bond. Limits for this type of coverage’s start at 25,000 and can go as high as a $25,000,000. A fidelity bond is a essential insurance product that ever business owner should carrier.

Fidelity bonds protect the policy owner from employees that steal from them

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Surety still important

Wednesday, March 24th, 2010

If you have never needed a bond until now you’re probably have no idea what a surety bond is?

A surety bond is usually required by a state in order to obtain a license. There are thousands of different types of bonds, covering car dealerships to contractors, there’s practically a bond for every type of business.

History

Surety bonds can be dated back to the Mesopotamian days; it’s the oldest form of insurance. There is evidence of Individual Surety Bonds in the Code of Hammurabi and in Babylon, Persia, Assyria, Rome, and Carthage.

What does a bond do?

Surety bonds do not protect you, but the obligee.  So why do you need a bond if it does nothing for you? The answer is because you have to have one in order to obtain your license. Sometimes the obligee will waive the bonding requirement if you post a cash bond or an ILOC. The problem with doing that is that the state “obligee” may hold on to your collateral until all liability has been released. You are probably asking yourself now how long does that take. The answer is they can hold your collateral until the statue of limitations runs out and there are no statues of limitations on fraud.

How is a surety bond rate determined?

The rate is equated by many factors state, bond type, credit, personal net worth, business net worth and experience.

If you are not ready to apply for a bond  and you just want to see what the surety bond could cost, check out our surety bond quick quote.

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Surety what is it?

Thursday, March 18th, 2010

Surety is taking up an obligation of another.  Surety is also the oldest form of insurance. Who needs surety? Surety is not usually required for an individual unless it’s a court bond or lost title bond. In most cases surety bonds are required by companies in order to satisfy their licensing requirements or to perform certain tasks like constructing a building these bonds are known as payment and performance bonds.

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Crime Insurance in Lieu of Bonds

Thursday, March 18th, 2010

Colorado Surety bonds

H 1062 – Crime Insurance in Lieu of Bonds. Would permit various county public officials (county officers, commissioners, clerks and recorders, sheriffs, coroners, treasurers, assessors, and surveyors) to purchase crime insurance in lieu of the surety bond required under current law. Status: 2/4/10 – Passed House; introduced in Senate, assigned to Local Government and Energy.  Giving public officials the option to purchase crime insurance in lieu of a bond will make it easier for them to get coverage. As long as it protects the tax payers the same way that the bond did I cant foresee a problem.

what do you think?

Let me know!

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Growing your insurance business with surety bonds

Wednesday, March 17th, 2010

How can an insurance agency expand their business in this economic climate?

The answer is diversification. If you’re a insurance agency that only writes personal lines you need to change it up and start writing commercial insurance. A good way to get into writing commercial insurance would be writing surety bonds. If you have never heard of  surety bonds, a surety bond provides consumer protection as a condition to granting licenses related to ” Motor vehicles “Mortgage Brokers Contracting services and other professional regulated licenses. Each State has its own surety bond amount as well as Bond form. I know it doesn’t really sound like a form of insurance, but it is. You can only sell surety bonds if you have an insurance license.  Surety bonds protect the consumer and help weed out flyby night companies. If your office writes surety bond you get your foot in the door to write the liability insurance or business owners policy that is required to have by the state.

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A few things the surety evaluates

Saturday, January 30th, 2010

When you apply for a bond the surety will evaluate the following things

Experience:

Some surety companies won’t write your surety bond if you don’t have experience or if you are a new  business. If this is your case then you may have to be placed in a  non-standard surety bond program.

Credit:

For a standard rate the surety company is looking fro a score above 675. If you have a low score or bruised credit them you may have to apply for a non-standard surety program

Assets:

Even if you have good credit and experience, you still must have the assets to support a claim. If you have a 700 credit score, but you have $0 in the bank you may have to be placed in a non-standard surety program.

Each scenario is different and there are exceptions to the rules. I have seen clients that have excellent credit and no assets and still qualify for normal rates.  I have also seen clients that have low credit scores and plenty of assets qualify for normal rates.  So don’t get discouraged there are markets that can help you in almost all situations.

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Why are bonds being required?

Monday, October 12th, 2009

Why are  bonds being required?
A bond is usually signed into law to regulate business and safeguard the public against fraud.  A surety bond helps the client seek financial compensation from breach of contract or if they have been defrauded of money.

Underwriting for these bonds
Loan modification bonds are underwritten similar to a loan. The surety agent will review the principal’s credit, personal financials as well as work experience.  The surety will not only evaluate the clients personal financial condition they will review the business’s financial stability too.  The underwriter will request a business financial statement usually a year end statement and the company’s most current quarterly statement. We understand will most of these bonds that a yearend financial statement may not be applicable since you may be a new business. If this is the case other underwriting may be required to obtain surety credit. Keep in mind that every scenario is different since everyone’s financial situation is not the same.

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