Month: September 2019

FREE CE Credits For You!

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Here’s some really great news:

FIA Surety is now an accredited Continuing Education provider for the states of New Jersey and Pennsylvania. We have created an Intro to Surety Bonding course that is approved for 3 CE credits.

 

Wait, it gets better… We will provide the course to you FREE OF CHARGE, and for groups of 3 or more, at your NJ or PA location (subject to travel limitations)!!!

Is that possible? 3 free CE credits? Well, yes.  Just complete the attached registration form and email back to us to get on our school calendar.

If you don’t have three or more attendees, you can still get the free CE credits at a seminar held at one of our central locations. Send in the form and we’ll contact you to work out the details.

There! Now tell your colleagues about it.

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site, Subdivision, Bid and Performance Bonds since 1979 – we’re good at it! Call us with your next one.

Steve Golia, Marketing Mgr.: 856-304-7348

First Indemnity of America Ins. Co.

FIA Surety School Registration Form.pdf

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181. How to Get Rid of Surety Bonds and Why You Should

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“How can I miss you if you don’t go away?”

Performance Bonds are issued by insurance companies – but they are not insurance policies.  When you get to the end of your auto insurance, it will expire if not renewed.  Plus, the company can cancel it in the middle of the year.  Boom, it’s done!  Insurance policies are not “forever.” Click for mood music!

With surety bonds it’s different.  First off, they’re harder to get.  Then, when you finally have it, they don’t expire! And the bonding company can’t cancel a performance bond. So how do they end?

The fact is, people focus on getting surety bonds because they are a mandatory element of many transactions, but they think little of getting rid of the bond – eventually.  Let’s go over why you want to close out a performance bond, and how to do it.

Every performance bond is married to a written contract that is identified in the first part of the bond.  They are married until death – until the contract is completed. If you have a two year contract covered by a Performance and Payment Bond, you have a two year bond, unless the contract is extended. If the contract is amended to a term of 25 months, the bond automatically follows.  If the contract dollar amount is increased, the bond automatically follows.  The point of the bond is to guarantee the Obligee’s (the beneficiary of the bond) satisfaction with the performance of the contract.  So the bond remains in force until the obligee / contract owner accepts the completed contract.

To close out the surety’s obligation, a release or acceptance of the contract by the obligee is needed.  The applicant / principal (contractor) can’t cancel or close the bond.  Only the obligee can end it.

Closing evidence can consist of a Status Inquiry form completed by the obligee.  The questions would be:

If the project IS completed:

Completion date: ___________  Acceptance date: _____________ Final contract amount: $___________

If the project IS NOT completed:

Approximate percentage or dollar amount completed: $_____________________________

Describe any disputes or performance issues on the project: _______________________________

Do you know of any unpaid bills for labor or materials? ____ No ____ Yes  If Yes, please describe: _____________________

Current estimated completion date: ____________________________________

Now that we know how to close out a performance bond, why bother to do it?  There are some very good reasons…

The Surety

  • The surety (bonding company) will conclude the liability on their books when the bond is released.
  • They also immediately earn all the remaining premium. Two good reasons!

The Contractor / Principal

  • That portion of the company’s bonding capacity will be restored to support a new contract.  This helps them qualify for more projects and larger ones. That is the source of their company revenues.
  • The “acceptance” of the work, by the obligee, is the official conclusion of the contract.  It ends the principal’s obligation – except for a “tail” such as a maintenance obligation.
  • When completed, the project is added to the company’s credentials.  They can now list the contract as a successfully completed job.  That’s how their resume is built.
  • The applicant company, it’s owners and spouses have a legal liability that arises through the indemnity agreement (a hold harmless issued to protect the surety.)  It is literally a liability which must be disclosed on their financial statements.  When the bonds are released, this company and personal liability ends.

The Bonding Agent

  • The agent wins too because more bonds can be issued.  And that’s how they make their living.

Conclusion

Everybody wins when the job is closed out and the bond gets released. This is a necessary process that should not be ignored.

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site, Subdivision, Bid and Performance Bonds since 1979 – we’re good at it!  Call us with your next one.

Steve Golia: 856-304-7348

For more cool bond stuff follow this BLOG in the upper right corner!

#168 Be A Code Breaker! (Surety Bonds)

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The Enigma Machine was a famous encryption device used by the Germans during WWII to transmit coded messages. It allowed for billions of ways to encode a message, making it incredibly difficult for other nations to crack German codes during the war.

Enigma Machine

In this article, You will learn how to break a code, how to solve a mystery in 20 seconds or less – every time. It is a surety bond mystery: The key element that determines the nature of the bond and predicts the successful underwriting path.

Here are your clues.

  1. “KNOW ALL MEN BY THESE PRESENTS:”  These words are the common beginning of surety bonds.  You’ll see them over and over.
  2. “WHEREAS” will start one or more paragraphs which describe the circumstances in connection with the bond need.
  3. “NOW THEREFORE, THE CONDITION OF THIS OBLIGATION…” is the beginning of the promise in the bond.  It is the point of the bond guarantee and it determines the underwriting path.

Find the “NOW THEREFORE” paragraph and you can break the code.  What does it guarantee?  If it is the correct performance of a contract, the underwriting will concern the applicant’s ability to complete the work.  If the guarantee is to pay money when due, the underwriting will concern the applicant’s credit history and financial strength.  It makes sense.

Test your new skill

Ever hear of an ARC bond?  Probably not, but here is the “Now Therefore” clause for you to analyze:

NOW THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH that if the Principal shall duly comply with the provision of said Agreement with respect to all amounts owed to the Obligee, as in said Agreement provided, during the term of this bond as hereinafter provided, then this obligation to be void, otherwise to remain in full force and effect in law…

OK Code Breakers, what can we conclude?

  1. It promises compliance with an agreement, so we’ll want to review that document.
  2. The applicant must comply with respect to “all amounts owed to the Obligee,” so the bond is guaranteeing the payment of money in the future.
  3. How can we determine if they are likely to do that?  Need to get financial and credit info on the client.

So there you go!  In 20 seconds you scoped it out and already have an idea about the underwriting, difficulty in placing, and potential markets that may have an appetite.

The underwriting path always follows the nature of the guarantee, which you will find in the NOW THEREFORE clause.  It’s that simple to break the code!

What a great feeling when you deal with the real experts.  You know you’ll get fast, efficient processing by folks who really care.  Call FIA Surety with your next surety bond.

FIA Surety is First Indemnity of America Insurance Company based in Morris Plains, NJ.  We provide site, subdivision, bid, performance and other forms of surety bonds.

Steve Golia, Marketing Mgr.  856-304-7348