Surety Bond FAQs
Q: How much does it cost to get a surety bond?
A: The cost of your surety bond will vary depending on the type of bond and the amount of bond coverage you need. Surety bond premiums usually range from 1-15% of the total bond amount. For example, if you get quoted a 2% rate on a $50,000 bond, you will pay $1,000 for your surety bond.
At SuretyBonds.com, our surety specialists work with so many markets, they’ll be able to access the most competitive rates available for any applicant. Call 1 (800) 308-4358 right now to get a free quote and determine the cost of your surety bond or submit a request online using the form below.
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Most Common Questions
- How much does it cost to get a surety bond?
- What is a surety bond?
- Who is a surety?
- Where do you go to get a surety bond?
- How do I get a surety bond?
- What is a letter of surety?
- Why am I required to purchase a surety bond?
- How will my credit score affect my surety bond cost?
- Does it cost more for new business owners to get a surety bond?
- Can’t I just buy an insurance policy?
- What is the difference in cost between contract and commercial bonds?
- Do surety bond costs vary for different states?
- How can I get the bond I need for the best value?
- Does it cost to apply for a bond?
- When do I have to pay for my surety bond?
Q: What is a surety bond?
A: A surety bond is a three-party agreement. The obligee requires the principal to buy the bond and honor its terms. The surety company financially backs the bond if the principal violates those terms. If the surety company pays out any claims made on the bond, the principal must reimburse the surety.
Q: Who is a surety?
A: A surety refers to the surety company that issues the bond. Bonds are often required when a business applies for a license. Bonds are a form of financial security, and the surety is the entity that backs the bond.
Q: Where do you go to get a surety bond?
A: You can get a surety bond from an approved surety agency that is licensed in your state. When you contact a surety agency, you should know the kind of bond you need and its amount. Most agencies will know the bond type and amount your industry requires, but being prepared speeds up the bonding process.
SuretyBonds.com is licensed to issue bonds in all 50 states. Call 1 (800) 308-4358 or submit a request for a quote and our surety specialists will walk you through the bonding process.
Q: How do I get a surety bond?
A: SuretyBonds.com makes getting a surety bond a breeze. You can contact a surety bond specialist immediately at 1 (800) 308-4358 from 7 a.m. to 7 p.m. CST Monday through Friday. Or, you can submit an online form in just 2 minutes 24/7, and a surety specialist will contact you as soon as possible.
After you’ve spoken with a specialist, our team will work with all of our underwriting markets to find the lowest surety bond cost possible. Your specialist will contact you with your rate within 1 business day.
Once you approve the surety bond cost, your surety specialist will execute the bond as quickly as possible. Once the bond has been issued, you’ll receive a copy via email, and we’ll send you the original hard copy via your preferred shipping method. Our overnight shipping option allows you to have the original bond form in your hands the next day.
Q: What is a letter of surety?
A: A letter of surety is often confused with a letter of credit. A letter of credit is issued by a bank. It assures a seller they will receive payment for goods or services from a buyer. If payment is not received, the buyer can request payment from the bank. Like surety bonds, letters of credit are forms of financial guarantees.
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% 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 request a quote and learn how much your bond will cost in a few business days—oftentimes the same day. Additionally, the experts at SuretyBonds.com are available 7 a.m. to 7 p.m. CST 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.