How to check surety bonds
Checking Bid Bonds
Have you had the task of checking surety bonds tossed onto your desk and not sure what to check or how to check them? Well I'm here to help you without you having to ask your boss.
If you were not the one who ordered the bond, find a copy of the bid offer (or prospectus) and make it available to you to compare the information needed.
The first thing you need to review is whether the correct bid bond form was used for the bid. Some companies use their own, some use state forms. Next, check if your company name and address is correct, if not, stop and call the agent or insurance company issuing the bond to report the error. It is amazing how a simple thing can void the bond. The intent between you and the bonding company may be valid, but the receiver of the bond may not want to take the chance and has the option to refuse the bond.
Going forward on this process, if I say, "stop," it means the bond is not valid to the receiver and you need to call the agent or insurance company. This is especially true when the bond is in favor of the federal government. Don't try to get any error past them as it will be challenged and you will lose the bid.
The next thing you need to check is the state in which the bonding company is authorized to do business in shown on the front of the bond; this should match the state listed on the power of attorney attached to the bond. If it doesn't, stop. If it does, let's continue.
Are you having fun yet? Scary when you consider these are for thousands of dollars and if tossed could cost the company bidding millions of dollars. So try to think of it as a check and you are just making sure all the "i's" are dotted and "t's" are crossed.
Next check the sale name, contract number, date of sale, and bond amount against the prospectus. They should match. Be sure that the sale name is spelled correct and has caps in the appropriate place.
Verify the date the bond was signed and sealed against the date on the power of attorney as these MUST match. On the power of attorney there is a spot showing the name of the person at the agent's office or bonding insurance company that is authorized to sign on behalf of the insurance company. Also, on the power of attorney at the top, you will see the name of the insurance company and the state it is doing business in and both must match the bond.
Now back to the bond. be sure to also verify the bond has been signed by the agent/insurance company and sealed with their corporate seal. You'd be shocked how many sneak through unsigned or no seal.
I thankfully work with a wonderful agent that handles several bidders and insurance companies, and the agent has a very, very low error rate.
So to recap, items needed to check:
Is this the correct form
your company name and address
bonding company name and the state matches the power
date of bond signed and sealed matches the power
sale name, contract number, bond amount and sale date match the prospectus
the bond is signed by the agent/insurance company.
By the way, be sure you have the bond signed on your side from an officer or another user authorized by the company's Board to sign the bond.
I hope this helps in your job.