Surety Bond Cost Guide for 2018
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The cost of your surety bond is calculated as a percentage of your total bond amount and it's mainly based on two factors:
- The type of surety bond you need
- Your financial health
This percentage is also referred to as a 'surety bond premium' or a 'surety bond rate'.
It's important not to confuse your bond's cost with the total bond amount. The total bond amount is the full coverage (also known as penal sum) of the bond required by law but it's not the amount you will have to pay.
For most license and permit bonds, your bond premium will most likely range between 1-10% of the total bond amount. So for example, if you need a $50,000 surety bond and, based on your financials, you get approved at a 3% bond rate, your surety bond cost will be as little as $1,500.
Want to know the exact cost of your bond right away?
1. License Bonds Cost
Most types of license bonds (also known as commercial bonds) are underwritten based solely on the owner’s personal credit score, especially when the bond's required amount is below $50,000. However, credit doesn’t always paint the entire picture. The following diagram shows how premiums are calculated (note: percentages are just estimates):
Surety companies establish specific underwriting guidelines for different bond types in each state. These guidelines demonstrate their risk tolerance based on historical data gathered on past losses from claim activity. Here are some of the major factors considred and why they matter.
1.1 Personal Credit (Credit Score)
Credit reports can provide insight into someone’s ability to repay their debt in a timely fashion, and willingness to meet their financial obligations. This is why credit is a key factor considered when applying for a loan.
Surety underwriters and other industry experts have identified a direct correlation between a business owner’s personal credit and the likelihood of a claim being triggered against their bond. Thus, as for-profit businesses, surety bond companies will try to lower their risk of potential financial losses coming from possible bond claims.
This does not mean that someone with bad credit cannot get approved for a bond. However, the price they pay may be higher than for someone with stellar credit. Learn more about our bad credit surety bond program here.
Below is an overview of your expected premium based on credit score alone.
While it’s important to try to maintain a good credit score, the details on the report are often even more important. If you have damaged personal credit, taking action to improve your report can often lead to more options and lower bond costs. Personal credit is most often considered with traditional surety underwriting, but on occasion business credit can also be reviewed.
1.2 Business Financial Statements
Financial statements can share vital information about a company. These statements can demonstrate past and present financial strength, and can also provide insights into which direction the company is headed. These typically consist of a Balance Sheet, Income Statement, and a Statement of Cash Flow.
Most smaller bonds ($50,000 and below) are underwritten based solely on personal credit, however, if you need a larger bond line, having business financial statements readily available is a smart move. If you have statements prepared by a CPA, those will hold even more weight, and are sometimes even required.
1.3 Personal Financials
A personal financial statement can provide a snapshot of a business owner’s wealth. This statement is an opportunity to demonstrate your Net Worth, which is ultimately is “what you own” (personal assets) minus “what you owe” (liabilities). These are not often required, but for larger bond amounts, some underwriters will request a review of these for the owner of a business looking to be bonded. Having a strong net worth, along with liquid assets, can help a business owner earn the lowest possible pricing for their bond requirements.
1.4 Cash Verification
Cash verification can feel invasive, but at times can be required in order to verify assets reflected on a personal financial statement. This is usually in the form of bank statements. Providing this verification can ultimately strengthen an applicant’s stance, and will likely lead to better bonding terms. These are typically only required for larger bond amounts or full bond lines.
1.5 Resume / Industry Experience
While companies that have been in business for many years can lean on business financial statements to demonstrate past and present success, new businesses may not have that luxury. This is where a professional resume for the business owner or other key managers can help. A resume can help demonstrate relevant industry experience, and can serve as an opportunity to build confidence in the chances that the business will be successful.
2. Performance (Contract) Bonds Cost
The cost of a performance bond can vary substantially depending on a number of factors such as:
- Size of the contract
- Type of work being completed
- State where work is being conducted
- Personal credit of the business owner
- Financial strength of the business
The price you pay for performance bond is typically just a small percentage of the total contract amount. This payment is referred to as bond premium.
Rates for larger contracts ($500,000 or more) can range from 1% to 1.5%, or even lower depending on the size and line of work. Smaller performance bonds can often be approved through credit-based programs, and pricing is most often about 3% of the contract amount. For example, if you get approved at a 3% rate for a $100,000 performance bond, you’ll pay $3,000 for that bond.
Owner personal credit will almost always be reviewed when underwriting a performance bond request. For smaller bond amounts, credit can be the most heavily weighted factors when determining whether an application will be approved and at what rate. However, larger contracts require business financial statements. In most cases, strong financials can help an applicant earn the best possible rate for their bond.
While most license and permit bonds require payment of annual premium on an ongoing basis, premium for performance (or contract) bonds is typically paid just once for the term of the contract. As such, renewal payment is not usually a requirement.
If bidding on a job, it’s important to have an understanding of what your bond costs will be, as you’ll want to make sure these are included in the bid itself.
3. Probate (Court) Bonds Cost
The cost of a probate bonds is just a small percentage of the total bond amount. These tend to be priced more aggressively than most other types of surety bonds, as rates typically range between just 0.5% to 1% of the bond amount. Rates can vary depending on the financial strength of the applicant. Percentages can be slightly higher for smaller bond amounts, or for extraordinary requirements. As a rule, the larger the bond amount being required by the court, the lower the available premium rates.
Here are a couple of simple examples to help understand more about court bond pricing. If you are approved at a rate of 1% for a $100,000 estate bond, you’ll pay just $1,000 for your bond. If you are applying for a $500,000 bond, and get approved a 0.5% rate, you’ll be required to pay a premium of $2,500.
It’s important to understand that strong personal credit is a requirement for most types of court bonds. While bad credit programs do exist for license and permit bonds, that is often not the case when applying for a probate bond. Smaller probate bonds can be underwritten based primarily on personal credit of the individual needing the bond. Larger probate bonds ($100,000 and above) can often require a review of the applicant’s personal financial statement.
There are a number of different types of probate bonds a court could require an individual to obtain. The most common are traditional fiduciary bonds, such as estate bonds and guardianship bonds. However, appeal (supersedeas) bonds require not only a premium payment, but often times will require the applicant to post full collateral to be provided for the total bond amount.
Below is a table that shows annual premium at rates ranging from 1-10% of the bond amount depending on the applicant's credit score. Line up the bond amount with a respective rate to see what the price of the surety bond will be. Please note, this table does not take into account extended term lengths, required expirations dates, or any state-mandated taxes, etc. However, use the below figures as reference only. As already noted, bond prices can be subject to factors other than your credit score.
|Surety Bond Amount||Yearly Premium|
(675 and above)
(599 and below)
|$10,000||$100 - $300||$300 - $500||$500 - $1,000|
|$15,000||$150 - $450||$450 - $750||$750 - $1,500|
|$20,000||$200 - $600||$600 - $1,000||$1,000 - $2,000|
|$25,000||$250 - $750||$750 - $1,250||$1,250 - $2,500|
|$30,000||$300 - $900||$900 - $1,500||$1,500 - $3,000|
|$35,000||$350 - $1,050||$1,050 - $1,750||$1,750 - $3,500|
|$40,000||$400 - $1,200||$1,200 - $2,000||$2,000 - $4,000|
|$50,000||$500 - $1,500||$1,500 - $2,500||$2,500 - $5,000|
|$75,000||$750 - $2,250||$2,250 - $3,750||$3,750 - $7,500|
|$100,000||$1,000 - $3,000||$3,000 - $5,000||$5,000 - $10,000|
How much does a $10,000 bond cost?
- Excellent Credit: $100 to $300 per year.
- Average Credit: $300 to $500 per year.
- Bad Credit: $500 to $1,000 per year.
How much does a $20,000 bond cost?
- Excellent Credit: $200 to $600 per year.
- Average Credit: $600 to $1,000 per year.
- Bad Credit: $1,000 to $2,000 per year.
How much does a $25,000 bond cost?
- Excellent Credit: $250 to $750 per year.
- Average Credit: $750 to $1,250 per year.
- Bad Credit: $1,250 to $2,500 per year.
How much does a $30,000 bond cost?
- Excellent Credit: $300 to $900 per year.
- Average Credit: $900 to $1,500 per year.
- Bad Credit: $1,250 to $2,500 per year.
How much does a $35,000 bond cost?
- Excellent Credit: $350 to $1,050 per year.
- Average Credit: $1,050 to $1,750 per year.
- Bad Credit: $1,750 to $3,500 per year.
How much does a $40,000 bond cost?
- Excellent Credit: $400 to $1200 per year.
- Average Credit: $1,200 to $2,000 per year.
- Bad Credit: $2,000 to $4,500 per year.
How much does a $50,000 bond cost?
- Excellent Credit: $500 to $1500 per year.
- Average Credit: $1,500 to $2,500 per year.
- Bad Credit: $2,500 to $5,000 per year.
How much does a $75,000 bond cost?
- Excellent Credit: $750 to $2,250 per year.
- Average Credit: $2,250 to $3,750 per year.
- Bad Credit: $3,750 to $7,500 per year.
How much does a $100,000 bond cost?
- Excellent Credit: $1,000 to $3,000 per year.
- Average Credit: $3,000 to $5,000 per year.
- Bad Credit: $5,000 to $10,000 per year.