Keep Bailing

Bail Bonds Are Surety Bonds: A Type of Insurance

When people hear that you’re a bail bondsman, they are always curious about the business. Last month, I blogged about what exactly is a bail bond. Once people understand that a bail bond is an insurance product, the next most obvious question is, “How is the underwriting of a bail bond different than the underwriting for typical insurance?” Comparing to an insurance you may have shopped for is probably the best way to understand the differences.

Let’s say, for example, you need fire insurance for your home, you might go to a fire insurance agent and apply. In most cases, your fire insurance agent will ask you questions such as, “What is the property worth?” or “Have you filed any previous claims?” or “Is your roof made of wood-shake or tile?” The premium you are charged on a fire insurance policy is simply a function of several standardized questions. The fire insurance agent simply puts this information into a computer / rate chart and out pops your premium. The fire insurance agent has extremely little flexibility in what they can ask. Furthermore, the customer could verbalize directly to the fire insurance salesman that they are a “three time convicted arsonist”. If arson is not a “filed” criteria with the determining insurance regulatory agency (and it probably isn’t), then a three time convicted arsonist may likely pay the same premium as an otherwise law abiding citizen who has the same history. Go figure.

However, a surety bond or bail bond is much different from typical insurance. Risk analysis and premium calculation are signficantly different in bail. A bail agent can use all available information to make an informed underwriting decision. A bail agent can ask whatever they like. They can use their intuition. Does the applicant seem trustworthy? Do they seem to be telling the truth? How long has the applicant been at their current job? Do they have kids that live in the area? What kind of work do they do? A bondsman can check the applicant’s credit history. Bondsmen can do all sorts of other seemingly arbitrary background checks. Furthermore, a bail agent can get a bad “gut feeling” and simply say, “I’m sorry Mr. Bail Applicant—we can’t help you.” If a fire insurance agent rejected fire insurance on a similar “gut feeling”, it would likely be illegal due to various “discrimination” laws.

Another major difference between a bail bond and other insurance is who is ultimately financially responsible. Again, let’s take a fire insurance policy: you pay your premium for the policy and in the unfortunate event you have a fire, you pay a deductible and the insurance company covers any additional loss. Contrast that with a bail bond. You pay your premium (10% of the full bond amount). In the unlikely event that the defendant doesn’t appear in court and cannot be located, you as the principal are responsible to pay the full bail amount to the court. If you cannot pay, the bondsman will. And, in the event that the bail bondsman cannot pay, his surety (an insurance company) would pay the court.

It’s really no wonder people have so many questions about bail. Besides the fact that so many people I talk to have never needed a bondsman, there really are a lot of details when it is such a simple process.

Photo Credit: © Irene Teesalu – Fotolia.com