This is one of the most frequently asked questions consumers have when they’re looking to purchase a surety bond for themselves or their business. Unfortunately, there isn’t one specific answer. Your exact surety bond cost will be determined by a few different factors.
The determining factors
The cost of a surety bond will depend on the amount of risk associated with the bond. Bonds that are less risky can typically be issued instantly at a set premium for all bond applicants. However, riskier bonds must undergo underwriting consideration before a quote can be issued to the applicant.
To find out more about the risk associated with many different types of surety bonds, visit our High-Risk Surety Bonds page. But for now, let’s dive into the various factors that affect the cost of your surety bond.
Applicant information
Our underwriting experts will look at an applicant’s credit score to assist with determining a quote. The applicant’s credit score may be utilized for a couple of reasons:
- Credit reports are an easy way for an underwriter to get an overview of an applicant’s financial history. Information regarding assets owned, bills paid on time, and debt-to-income ratio go a long way in assessing risk.
- Some bonds are priced based on the bracket an applicant’s credit score falls in. For example, qualified applicants with a 600+ credit score can usually expect a rate at or near 1% of the bond amount, and it usually tiers down to 2%-4% or 5%+ of the bond amount for applicants with less stable financial histories.
IF THE UNDERWRITER IS NOT SATISFIED
Occasionally, the applicant’s credit score alone isn’t enough or the type of bond sought requires a more thorough examination. An underwriter may examine other aspects of the applicant’s financial history, including bankruptcies, mortgages, whether the person rents or owns a home, and more.
While getting a surety bond is often very reliant on your credit score, don’t let poor credit deter you from applying for a surety bond. Our bonding specialists at SuretyBonds.com work hard to provide every applicant with the opportunity to get a bond, regardless of their credit history. Learn more about obtaining a surety bond with poor credit by checking out our Bad Credit Surety Bond Program.
Bond amount
Some surety bonds are required in small amounts, such as $1,000 or $10,000; these will typically be considered less risky and be issued at a set premium for all applicants. However, surety bonds in higher amounts have a higher risk associated with them and often require underwriting consideration.
When a claim is filed against a bond and found to be valid, payment will be made by the surety company to the customers affected in an amount up to the bond’s full amount. Therefore, the higher the bond amount, the more money the surety will potentially have to pay.
Bond type and industry
There are many different types of commercial surety bonds, including bonds for mortgage brokers, travel agents, janitors, and contractors, as well as many industries in between. The price of your bond may depend on the industry you work in, as bond risk varies from industry to industry.
Some industries have an active history of claims being filed against their bonds, meaning that regardless of other factors, the bond must be underwritten before a quote can be issued. For example, the freight brokerage industry has an extensive history of fraud. In an attempt to fight the fraud occurring in the industry, the Fighting Fraud in Transportation Act of 2011 proposed increasing the freight broker bond amount from just $10,000 to $100,000. This amount increase would provide a financial cushion for companies affected by fraud, allowing them to stay in business.
How to best position yourself for the underwriting process
If you’re ready to submit a surety bond application that requires underwriting, SuretyBonds.com wants to make sure you’re setting yourself up to get the best rate possible. This means that our surety professionals need to be provided with all the information necessary and pertinent to your unique history.
To learn more about the underwriting process and what to expect, we recommend you utilize our Definitive Guide to Surety Underwriting.
Get financial documents ready
We understand that many of our customers have never had to prepare business or personal financial statements before, but having these documents prepared ahead of time enables the underwriting process to be as efficient as possible. Providing these documents is often not required and usually voluntary in an effort to prove financial stability. There are two financial documents that are typically pertinent to the process: an income statement and a balance sheet.
In many instances involving new businesses, our underwriters will require the financial statements of the owner, rather than the business itself, because there wouldn’t be much to report. However, for an existing business getting bonded, we will need its statements from the most recent fiscal year. Along with the income statement and balance sheet, some underwriting may also require verification of any cash or investment assets in the form of bank statements and account screenshots.
What’s next
Complete an online application or call 1 (800) 308-4358 from 7 AM to 7 PM CST Monday through Friday to take advantage of SuretyBonds.com’s streamlined and simplified bonding process.
