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Understanding Surety Bond Costs

Learn what impacts the cost of a surety bond.

Side view of hand holding a pen with finger pressed on calculator

Whether you're getting a surety bond for the first time—or getting different policies as your business grows—it’s important to understand how bond costs work. The rate you pay for a surety bond is known as the premium, and its amount depends on a variety of factors that are explained in this guide.

How Much Does a Surety Bond Cost?

On average, the cost for a surety bond falls somewhere between 1% and 15% of the bond amount. That means you may be charged between $100 and $1,500 to buy a $10,000 bond policy.

Most premium amounts are based on your application and credit health, but there are some bond policies that are written freely. These bonds can be issued instantly at a fixed rate without a credit check or underwriting of any kind. For example, the California Legal Document Assistant Bond has a fixed premium that lasts for two years.

Higher-risk bonds usually carry higher premium costs. Surety companies assess the level of risk by the bond type and the applicant's financial history. A bond type with higher risk plus an applicant's poor credit may result in a premium that could be as high as 20% of the bond amount.

In most cases, surety bond premiums are paid upfront and in full for the bond term. Most bonds have a term of one year. However, there are some bond terms that last two years or more.

Financing options may be available through your surety provider for high-priced bonds. Common payment methods include credit cards and checks.

What Factors Impact the Price of a Bond?

The better your credit score and professional experience, the less you'll pay to get a surety bond. That said, the premiums for license, construction, and court surety bonds are generally based on these factors:

  • Type of surety bond needed
  • Bond coverage amount required
  • Your credit history
  • Regulatory authority requiring the bond
  • The bond provider you work with
  • The state you will be operating in
  • Years of experience you have in the industry
  • Your claim history for previous bonds

Some bonds, like the policy needed to be a Title Insurance Producer in Maryland, are the same price for all applicants. Other bonds, like those needed for immigration businesses and mortgage companies require credit checks during the underwriting process. And higher risk bonds – like title and escrow agency bonds – require financials, tax returns, and a credit check of the business owner.

Is the Bond Amount the Same as the Bond Cost?

No, your cost for a bond is not equal to the bond amount. For instance, if you need a $10,000 bond, it doesn't mean that you'll pay $10,000 to officially be bonded.

Instead, think of your bond's coverage amount as your liability (referred to in the industry as the penal sum). While you'll pay less than the coverage amount to get the bond, you can be liable up to that amount if a claim against you is upheld in court.

Can You Get a Surety Bond With Bad Credit?

Yes, it's possible to get bonded with bad credit or with a claim made on a prior bond. But this will place you in a higher-risk category, meaning you may have to pay more for your policy.

Next Step: Know the Basics of Surety Bonds

Now that you know what goes into the cost, it's time to find out how a surety bond works.

Learn about the parties involved and what makes a surety bond work.