Surety Bond Cost – FAQ

Q: What does a surety bond cost?

A: Pinpointing an exact cost for many surety bonds before they are issued can be problematic since so many variables affect the final cost. Surety providers calculate a bond's premium based on the specific bond type, its needed amount, and the applicant's credit score. Most surety providers charge a base fee that's a percentage of the total bond amount to be issued.

Bond premiums usually cost between 1 and 4 percent of the needed bond amount for an typical applicant with a good financial history. However, those who are considered high-risk applicants could pay anywhere from 5 to 20 percent of the total bond amount. If you know the bond amount needed and your general financial situation, you can calculate a ballpark figure for what you might be charged, but the most accurate way to determine a bond's cost is to apply for a surety bond and get an exact quote.

Q: Why am I required to purchase a surety bond?

A: You may be legally required to purchase a surety bond due to your job type or where you work. Many government entities mandate the use of surety bonds for certain industries as a preventative protective measure for consumer interests. Oftentimes bonds are required before business owners can get a license to operate in a certain city or state.

Since bonding regulations are established by both state and municipal entities, be sure to research all regulations for your industry. With the current increase in bonding regulations across virtually all industries, we urge new business owners to direct questions about specific bonding regulations to the experts at SuretyBonds.com.

Q: How will my credit score affect my surety bond cost?

A: Because surety providers offer a financial guarantee on your future work, they will carefully examine your application before issuing you a bond. During the underwriting process they might consider your work history, credit score, and other financial records to determine your reliability. Those with good credit scores generally pay lower fees for their bonds.

Although poor credit does not necessarily disqualify an applicant from getting a bond, some surety providers prefer not to work with those who might be financially unstable. Some surety providers do work with "high risk" applicants, but they will charge a significantly higher fee that could be anywhere from 5 to 20 percent of the total bond amount. The specialists at SuretyBonds.com do everything possible to assist every professional and business with their bonding needs for a reasonable cost.

Q: Does it cost more for new business owners to get a surety bond?

A: New business owners might have to pay more for their bonds depending on the extent of their financial history. A new business owner with a good credit score and otherwise sound financial history will usually get a competitive rate. However, because some new business owners haven't had a chance to establish a strong line of credit, they may be charged a higher fee since the surety provider can't confirm their financial accountability.

Fortunately the surety industry offers numerous resources for new businesses that need help with bonding. The Small Business Administration established the Office of Surety Guarantees to help emerging enterprises purchase and maintain necessary bonds. The Surety and Fidelity Association of America developed the Model Contractor Development Program to help new contractors access bonds more easily.

Q: Can't I just buy an insurance policy?

A: No. Bonds and insurance are two completely separate means of financial protection. Insurance is basically a risk-transfer tool between two parties where individuals exposed to similar risks contribute premiums into a pool. Surety bonds act as three-party risk-mitigation contracts where financial loss is not expected. Surety bond premiums typically only cover the costs of qualifying services and underwriting processes. Unlike insurance policies–which act as a retroactive protection–bonds work like a type of credit where the principal is on the hook for claim payments in the event of default. Thus bonds encourage professionals to act appropriately in order to avoid claims.

Q: What is the difference in cost between contract and commercial bonds?

A: Besides the fact that both are types of surety bonds, these two bonds really have nothing to do with each other. Commercial bonds encompass specific license and permit bonds that cover professionals from mortgage brokers to auto dealers to telemarketers. Contract (or construction) bonds are issued exclusively to contractors to guarantee that appropriate payment, maintenance, and performance is fulfilled during a construction project.

Because so many problems arise in the construction industry on a regular basis, surety providers heavily scrutinize those who apply for contract bonds. Contract bond premiums vary greatly based on the exact bond type and how much the construction project will cost. When surety providers consider commercial bond applicants, they do so with much less scrutiny since the potential risk is not nearly as high. Commercial bond rates are typically more predictable–pending the applicant's financial records, of course.

Q: Do surety bond costs vary for different states?

A: Yes, surety bond premiums vary by jurisdiction since different government agencies have set their own regulations for certain bond types. The needed bond amount directly affects premiums charged by surety providers because they calculate base fees as a percentage of this amount. For example, depending on the state, county, and city in which they work, notaries public typically need either a $5,000 bond or a $10,000 bond. It follows that a $10,000 notary bond will cost a principal more than a $5,000 one would. SuretyBonds.com provides bonding opportunities in all 50 states and can offer competitive rates no matter the jurisdiction, specific bond type, or needed bond amount.

Q: How can I get the bond I need for the best value?

A: Buying a surety bond is like making any other important financial decision–the best way to get what you need for a good price is to consider all of your options. Once you find a reliable surety provider who offers you great service for a competitive price, you will probably want to work with them when purchasing future bonds since they will already have your financial history on record. Sticking with a reliable surety provider can decrease the amount of stress and uncertainty the bonding process can produce in the future.

Q: Does it cost to apply for a bond?

A: No, the simple act of applying for a surety bond does not cost you any money. Although applicants do pay a premium to get the bond, the application process itself is complimentary. In fact, you can submit an online application now in just a few minutes and get a quote back within a few business days. Furthermore, the experts at SuretyBonds.com are available 8 AM to 5 PM Monday through Friday to answer your bond-related questions.

Q: When do I have to pay for my surety bond?

A: Surety providers almost always require full upfront payment to be made before they will issue the bond to a principal. Sometimes companies do offer financing for high-risk principals with poor credit scores. However, these situations are rare, and when they do occur the surety provider will still require a certain percentage of the premium upfront. Most providers take credit/debit cards so that underwriting and bond processing can be completed much more quickly. If you prefer to write a check you will have to wait longer to get the bond, as your payment will have to be processed before the provider issues the bond.