Payment and Performance Bond Information
- Indemnity Agreement
Qualifying for a Payment and Performance Bond
Some of the surety companies we represent offer an expedited underwriting process based on a completed application and personal credit scores. A minimum credit score of 600-700 will be needed, varying by company, and business credit will also be reviewed. The stronger your score, the easier it will be to qualify for a payment and performance bond. The application often includes work references for large or previously bonded projects.
Rates and Forms
Premium rate on smaller bonds in the expedited program will vary by surety company, but frequently a rate of 3% will be applied. For example, on a $100,000 bond the premium would be $3,000. A bond request form will be completed accompanied by a copy of the contract.
Bonds Over $500,000
For bonds over $500,000 the underwriter will need more information about you and your business. A contractor’s questionnaire includes basic information like the application and expands to cover areas such as key people, scope of operations, and greater detail on project experience and references. Along with the completed questionnaire, business and personal financial statements will be required. Other information such as a bank reference letter and work in progress report may be needed to round out the underwriting package for a payment and performance bond. Rates on these bonds can vary from 0.5-3%.
Underwriting for Payment and Performance Bonds
It’s important to remember that a surety bond is not insurance. The surety bond company will evaluate you and your business to the best of their ability in order to pre-qualify your ability to perform the work. This prequalification process involves the Three C’s of risk underwriting – Character, Capacity, and Capital
Preparing an Indemnity Agreement
The application will include information about ownership of the bonded principal. This information is needed in order to prepare a surety indemnity agreement. Indemnity is your promise to the surety bond company to make them financially whole, should a loss occur