Surety bonds are confusing, therefore there are many surety bond misconceptions. Incorrect information is misleading, so it is important to know the facts. Here are the most common surety bond myths debunked.
Myth #1: Surety Bonds are the Same as Insurance
Surety bonds are not the same as insurance.
This is a common surety bond misconception. The truth is there are many differences between surety bonds and insurance. The risk factors, the rate you’ll pay, and what is expected from each one make surety bonds and insurance very different forms of protection.
Myth #2: Surety Bonds are the Same as Bail Bonds
Bail Bonds are a type of surety bond, but the general term ‘surety bond’ does not mean just Bail Bonds. The term ‘surety bond’ means all types of surety bonds.
To learn more about the different types of surety bonds, check out this awesome infographic.
Myth #3: Surety Bonds Protect the Person Who Purchases the Bond
Surety bonds protect the person requiring the bond, not the person purchasing it.
For example, a Contractor License Bond does not protect the contractor, but rather protects the state who licenses the contractor.
A Motor Vehicle Dealer Bond does not protect the car dealer, but instead protects the state the car dealer is licensed in and his customers.
Myth #4: Surety Bonds are Expensive Because you Have to Pay the Full Bond Amount
You do not need to pay the full amount of a surety bond. For example, if you need a $20,000 bond, you do not need to pay $20,000. Instead, you will pay a small portion of this amount. You might only need to pay 1% of the total surety bond amount to get your bond.
Curious to find out what you’d pay for a surety bond? Get a free quote.
Myth #5: You Have to Pay Monthly for Your Bond
You do not need to pay monthly for your bond. This is a big surety bond myth. A surety bond is not like insurance.
You only need to pay one time for your bond (unless you are financing your bond). If you need to renew your surety bond, you would need to pay again.
Myth #6: Surety Bonds Cost the Same Amount for Every Person
There is no one flat-rate for surety bonds. The price you will pay for your surety bond will depend on many factors such as your personal financial strength and credit history.
Some surety bonds, like Lost Title Bonds or Notary Bonds do not require credit checks, but the price you’ll pay may still vary.
Myth #7: The Surety Company Does Everything For You
A surety bond company has one job: to provide you with the surety bond you need. If there is other work required, you will need to complete that work.
For example, if you need a Lost Title Bond, the surety bond company will issue you the Lost Title Bond, but they will not actually give you the title for your vehicle.
Likewise, if you need a Notary Bond, the surety bond company will issue you a Notary Bond, but they will not actually give you the notary kit and stamp.
Once you get your surety bond, it is up to you to complete the rest of the process.
Myth #8: Surety Bonds are Only Needed for Large Companies
Many types of companies can benefit from getting bonded. Even if you are not required to get a surety bond, your company could benefit from a fidelity bond, even if your company is small.
Myth #9: Surety Bonds can be Used State to State
Every state has their own set of rules and regulations, thus a surety bond in one state will not be valid in another state.
An Oregon Motor Vehicle Dealer Bond is not the same as a California Motor Vehicle Dealer Bond. Likewise, a California Mortgage Loan Originator Bond is not the same as a Colorado Mortgage Loan Originator Bond.
Myth #10: Surety Bonds are Only for People With Good Credit
In the past, individuals with injured credit were not eligible for surety bonds. This is not the case today. Reliable surety bond companies have bad credit options for individuals who need to get bonded.
Myth #11: All Surety Bond Companies are the Same
Not all surety bond companies are created equal. Some will charge higher rates for bonds. Also, some surety companies are not licensed in all 50 states. Researching surety bond companies before you get bonded is a good way to ensure you are getting the right bond at the right price, and that you will be in good hands.
At Surety Solutions, we are licensed in all 50 states and have relationships with over 30 of the top insurance carriers in the country. Our dedicated staff is available by phone at 866.722.9239 to answer even the simplest questions you might have about getting bonded. And our online quote generator lets you view rates for your bond so you can compare prices before you buy. Now that’s surety bonds made easy.