Simple Solutions Blog

3 Keys to Establishing a Surety Relationship

 January 6, 2020     UFG Insurance    Surety 

At first glance, obtaining surety bonds can seem overwhelming, but it doesn’t have to be that way.  

Contractors have a lot on their plate and enough to worry about with running a business as well as focusing on current projects and continually seeking new work. But if you’re considering projects that require surety bonds, the first step is to build a surety relationship that will benefit the company for years to come. 

Here are three key questions to consider when establishing a surety relationship. 

1. Do you have a knowledgeable and experienced surety agent?

Surety is a unique form of credit that is provided by insurance companies.  It is specialized and few insurance agents are really conversant in this field.  You and your business will benefit from having an experienced, knowledgeable agent with industry connections. The agent may or may not be the same business partner you use for business insurance coverage. When establishing a surety agent relationship, you’ll want to ask questions like:

  • How long have you worked with contractors and provided them with surety bonds?
  • Have you worked with contractors of my size and capability before?
  • Can I count on you for open and honest communication?
You’ll also want to look for an agent who is active in organizations such as the National Association of Surety Bond Producers (NASBP), Associated General Contractors (AGC), Associated Builders and Contractors (ABC), Construction Financial Management Association (CFMA) and other construction-related organizations. Is your agent involved with these groups?

Learn more about the basics of surety bonds.

2. Does your CPA understand construction accounting?

Finding an agent who is a surety professional is a great step forward, but you won’t get far if you don’t have a CPA who truly understands the ins and outs of construction accounting. For example, a construction-oriented CPA understands what sureties want to see in a financial statement and sureties place a high degree of importance on the quality of your internal accounting as well as the presentation of your financial statement. The better the quality of the presentation, the more you enhance your standing in the eyes of the surety. The CPA’s ability to produce a good quality financial statement will enhance your ability to securing bonding—and may even help you increase bonding capacity down the road. 

Other than a construction CPA, what positions are essential to building a successful team of construction advisors? Here are three positions you may want to consider.

3. Can your surety grow with you? 

Selecting a reputable surety capable of handling all of your bond needs may be the most important aspect to establishing a surety relationship. The vast majority of all sureties are compiled in the U.S. Department of Treasury list of certified companies (Circular 570). The federal government determines the maximum size of bond it will accept from each surety.  This limit is used by state and local governments as well.  Make sure that your surety has sufficient capacity to handle the size of projects and bonds you will need in the future. Another way to gauge a surety company is to look at their A. M. Best rating. This is a widely accepted measurement of an insurance company or surety. We strongly recommend considering companies with no less than an A- (excellent) rating and at least a VII size rating. You will also want to confirm that your surety is able to handle the types of bonds you may need and that it is licensed in the states in which you operate.  

With nearly 70 years of bonding experience, UFG Surety has a long history of providing surety bonds to contractors and helping them grow along the way. Contact us today to learn more.

Ready to grow your business? Read: How to build a successful construction team.  


The information provided is for informational purposes only. Every attempt is made to ensure that the information is accurate; however, it is not intended to replace professional advice. For more information, see Disclaimers & Other Legal Documents.