Becoming A Surety Producer – The Perks to Working In The Surety Industry
As local work advocates, we thought it would be great to start breaking down different industries and job-specific descriptions within those industries to help our job seekers better decipher which industry is the best fit for their dream career. Now, while nearly everyone knows what an insurance agent is many have never heard of a surety bond agent. Surprisingly, most people do not even know what a surety bond is, although it is necessary for almost any business in order to operate legally and within the laws of the federal, state, and local governments. Surety bonds are crucial for any business owner, which means the industry is always in need of people who can produce any bond in any state. Becoming a surety producer for a surety bond agency is a great career option for people who are self-motivated and driven to grow within their company as well as personally.
What is a Surety Bond
A surety bond is a guarantee between 3 parties. The surety company, an obligee, and a principal. The surety writes bonds promising that the obligee will complete work or performance based on a contract to the standards of the Principal, and if not, a claim can be made against the bond in order to eliminate any financial loss that may have occurred. Surety bonds are used for:
- Protect Taxpayers
- Protect Consumers
- Businesses (employers, employees, the business itself)
- Support economic growth and Development
Some of the most popular surety bonds are:
What is the role of Surety Bond Producer
A surety bond producer a licensed business professional, or liscensed insurance agent, who specializes in surety bonds, products, and the surety market with knowledge in business strategy and underwriting. The role of a surety bond producer is crucial for both the surety agency and the inquiring party. Construction bonds are big-ticket items for both the project manager and the surety company, so the producer has to have extensive knowledge and understanding of the construction industry. The surety bond producer is responsible for preparing the contractor for the bond pre-qualification process as well as the steps to follow. Obtaining a contract bond, payment bond, performance bond, or bid bond is crucial for any construction company looking to win big contracts. In order to obtain the right bond at minimal risk, the surety bond producer is responsible for the following:
- Assist contractor in obtaining bond including increasing overall bond capacity
- Review all financial documents for contractor before submitting surety bond application or request
- Be the advisory and liaison between contractor, surety agency, and insurance agency — giving business advice and management consulting to contractor when necessary in order to help in the growth of company
- Ensure that the contractor’s business needs are met by the specific bonds requested and bond amounts are made at competitive rates
- Nurture relationship with contractor after bonds have been written
- Review current, past, and future contracts or bids to assess risk for both the surety agency and the contractor himself/herself.
- Help guide contractor through the entire bond process ensuring that no steps are missed and making it an easy and enjoyable process for the client.
A surety bond producer also helps determine whether or not an obligee meets the criteria required of them in order to obtain a bond. The criteria for each bond differs based on the bond type, personal credit history, bond history, years of business in a specific industry, the state in which the bond is needed, and so on. The criteria an obligee will need to meet will vary based on many different factors and it is important for the underwriter to know the criteria and decide whether or not the client would be a risk. A surety bond producer has a very important job in the surety industry, ensuring that the surety company they are working for are not taking on high-risk clients while also knowing local, state, and federal regulations to ensure that all criteria and standards are met.
The Perks to Working in the Surety Industry
The surety industry is a great industry to work in for a handful of reasons:
- Salary Range — $68,000 – $100,000+ with the median salary being $70,000 which is above the average median salary in the US
- If you are self-motivated and eager to earn more, this is a great industry to work in because most Surety Bond companies will start their underwriters at a base pay with a commission based bonus structure based on the number of bonds written and the size of the bonds written
- If you have a college degree, your base pay will likely be higher
- You get to build relationships with your client
Qualifications and Steps to Becoming a Surety Producer
If you are looking into becoming a surety bond producer, there are a few necessary steps that need to be taken before you can qualify to legally produce any bond. These steps go as followed:
- First, make sure that you meet these specific qualifications before you start the process to become a licensed insurance agent.
- Must be 18 years old
- Must pass the Insurance Examination administered by Prometric
- Provide Fingertips (if required)
- Provide proof of lawful presence in the US
- Pay required fees (non-refundable which is why it is important to make sure you meet the pre-qualification standards)
- Submit the application for a license and wait for review and approval
- Must have account-management skills with a strong problem-solving mindset. Producers will be responsible for client interfacing, keeping relationships with clients, and understanding the importance of getting clients the bonds they need in order to grow their business and run it legally.
- Although a bachelor’s degree is not required, it is highly suggested. Many surety companies will look for graduates who studied finance, business, or risk management: not only can this increase your pay, it will help advance your career, proving you have the needed industry knowledge to succeed.
- A candidate looking to become a surety bond producer must understand and think in numbers and percentages to understand risk, reward, and profit margins in order to decide whether or not a bond can be written for a specific client
FAQs About Surety Bonds – Get To Know The Industry
How much do surety bonds cost?
The cost of any bond will depend on a variety of things including the cost of the contract and the personal credit history of the obligee. Also, the cost of a bond will vary depending on the rates filed by the insurance company filed to the state insurance department based on the amount of the contract. The price paid for a bond ranges from as little as .5% to as high as 3% of the contract amount, and the premium varies based on personal credit history, bond history, and whether or not the obligee is just starting out in the industry.
What are the different types of contract bonds that people can request?
Contract bonds are a type of surety bond that are required for construction projects. Contract bonds include:
- Bid Bonds
- Performance Bonds
- Payment Bonds
- Maintenance Bonds (aka warranty bonds)
Who needs to obtain the contract bond for a construction project and what does a surety producer look for in terms of qualifying?
Contractors and subcontractors are responsible for obtaining the appropriate contract bonds before starting a construction project. A contractor or subcontractor should contact their national surety company to start the underwriting and approval process. The bond producers who work at The Surety Place, located in Phoenix, know exactly what requirements are needed for each bond and are capable of writing bonds in any jurisdiction. Many surety companies have specialty programs to help clients obtain the bond needed in order to grow their business. The process for obtaining a contract bond includes an extensive review of the contractor or subcontractor’s financial history, current and past financial statements showing both payouts and receivables, copies of contracts that of interest, information about the owner and high level employees, any current contracts, proof of insurance, any bank loan information, etc. The extensive background information is for the security of the surety, the contractor or subcontractor, as well as the owner of the construction project.
What kind of construction projects require bonds?
Surety bonds are suggested for all construction projects because they are a type of insurance and help guarantee quality work but they are not always required. Federal, state, and local governments often require surety bonds for public construction projects. Federal laws require any federal construction project over $150,000 must obtain both a performance and payment bond. The surety bond producer can help an obligee decipher which bonds are needed and at what premium and coverage is needed.
Is there a pre-qualification process for obtaining a bond?
Every bond company will have a different pre-qualification process performed by their underwriting and producing team. Underwriters will look over a handful of things in order to determine the risk factor of a specific bond and the person requesting it. They will look over work-in-progress schedules, review and evaluate balance sheets, go over financial statements, check bond history, credit score, work history, business model, and experience to determine whether or not the principal qualifies for the specific bond.
Do contractors have a maximum bond capacity?
As with most things, the bonding capacity for contractors is based on their personal and business financials. If a contractor has proof of strong financials and an acceptable amount of liquidity to their name, they can potentially get approved for more bonds which means they can bid on more construction projects. Rule of thumb is that contractors must provide 60-90 days worth of sufficient funds per project. This means they must prove that they can pay for upfront costs of the bond, labor, materials, insurance, and any extra fees until they receive the first installment from the owner of the project.
What is a GIA?
GIA stands for general indemnity agreement. This is a contract between a surety company and the contractor in which they underwrite a bond for. This is a legal, signed agreement that obligates the contractor to repay the surety for any loss caused by the contractor’s failure to complete the project or fulfill the requirements that were initially laid out in the contract and bond agreement. The GIA ensures that the surety will not take any loss on behalf of the principal’s inability to complete the project to satisfactory standards. It also is meant to encourage contractors to honor the obligations agreed upon when obtaining the bond.
Becoming A Surety Producer – The Perks to Working In The Surety Industry
Whether you want to be a surety producer or work in a different division of the surety industry, the options are endless and the room for growth and expansion are endless as well. For people who love to have continuous working relationships with customers and look forward to creating new relationships, being a surety producer is a great option for a career. If you are self-motivated and driven to continuously grow your network, consider becoming a surety producer – the perks to working in the surety industry are truly limitless.