ARC Bond Application

[Mother Bond]

On the application, it asks for my spouse's information. He has nothing to do with the business and I am uncomfortable about providing his personal info. What is this used for?

[Surety Queen]

On the application, it asks for my spouse's information. He has nothing to do with the business and I am uncomfortable about providing his personal info. What is this used for?

There are a couple of reasons why the surety industry requires spousal indemnity...

1) Bonding companies do their best to underwrite the risk of a principal. To accomplish this they use credit reports, business financial statements, personal financial statements, etc. However, none of these documents provide any indication of the individual’s character. Principals are complete strangers to bonding companies, so they require the spouses to personally guarantee them as well. The thinking is that if the spouse won't personally guarantee them, why would Surety want to?

2) Bonds are not insurance, they are a form of credit. In the event of a claim, the surety will look to the principal for repayment. Often when a claim arises and there is no spousal indemnity, the principal will move all of their assets under the spouses name so the surety can not collect. Basically, the reasons why principals don't want their spouses to sign is exactly why the surety wants them to sign.

There are a couple of ways out of spousal indemnity:

A prenuptial agreement stating assets are separate will be acceptable by almost all bonding companies.

100% collateral will get you out of all personal indemnification. However, doing so, you lose the benefits of a bond.

Spousal and personal indemnification can be rather intimidating. The fact of the matter is if you do not play by the bonding companies rules, they simply will not write your bond. Provided the bond has an aggregate limit, you will know approximately how much you are guaranteeing. The bonding companies are not looking to take your house, but are looking to protect themselves in the event of a claim.