When you deal with surety bonds, fraud is always a possibility. While it’s rare to come across these cases, it still something that parties should safeguard themselves against. As with any type of insurance fraud, the cases can be large or small. The types of fraudulent activities can range from small infractions to large schemes that result in multimillion-dollar payments.
When you are seeking a surety bond, be on the lookout for common fraudulent activities, however rare they may be.
Verify Your Bonds
One of the best ways to safeguard against surety bond fraud is to ensure that the bonds you purchase are verified. The first step in this process is to ascertain whether or not a surety bond company is recognized as a legitimate surety. It is incumbent upon attorneys and their clients to do their due diligence in researching the surety company that they get their bonds from. The U.S. Treasury Department will have a list of certified surety companies, or you can work with a trusted surety agency that you know only partners with reliable, verifiable surety companies. It’s even a good idea to check with your state insurance department just in case.
If you are obtaining a bond for a veteran’s fiduciary, you can also work in conjunction with the VA to verify that the bond is legitimate, the amount is correct and that it is payable to the intended person.
Be On the Lookout for Red Flags
There are a few red flags that should signal that you may be working with an illegitimate bond company:
- The company cannot produce any credentials
- They do not appear to have any experience within the bond, the insurance industry or with your specific case
- They do not have an extensive underwriting process
- Their premiums appear to be much cheaper than the industry standard. This could indicate that an out of date rate is being used
- They seem uncertain about the particular type of bond or language used
- There is no licensed agent involved in the process
Ensure That Only Trusted Parties Are Involved
Fraud doesn’t always come from illegitimate companies. In the cases of representative payees, fraud is most often committed by the person who has been nominated to oversee funds and payments from sources like the Social Security Administration. Never place a person in a position of financial power that you do not completely trust.
Ask Us Anything
Use your best judgement when going through the process. If you are unsure about anything, contact our agents here at The Patrick J. Thomas agency today.
Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.