INTRODUCTION
The cost of a surety bond usually falls between 1% and 10% of the total bond amount. This percentage depends on several factors, including the applicant’s credit score, the type of bond required, and the level of risk associated with it.
For example, if you need a $10,000 surety bond and the rate is 1%, you will pay $100. However, if the rate is 10%, your cost will rise to $1,000.
UNDERSTANDING SURETY BOND COSTS
The cost of a surety bond is known as the bond premium. It represents a negligible portion of the bond’s entire value. Two key factors influence this cost: For more detailed information, visit Alpha Surety Bonds official site to learn more about how these factors impact bond premiums.
- The type of surety bond and its coverage
- The applicant’s credit history
People often confuse the bond’s total amount with its cost. The total bond amount is the full coverage required by law, but it is not the amount you must pay upfront.
IS THE BOND AMOUNT THE SAME AS THE BOND COST?
No, the amount of the bond is not the same as its cost. The cost is only a fraction of the total bond amount. For example, if you need a $20,000 surety bond for a contractor license and your approved rate is 5%, your cost will be $1,000.
If a claim is made against your business, you might have to pay the full bond amount. This is why maintaining legal and financial responsibility is crucial.
FACTORS THAT AFFECT SURETY BOND COSTS
Several factors impact the rate you will pay for your surety bond. These include:
- Contract size – Larger contracts may require higher bond amounts.
- Type of work – Different industries have different levels of risk.
- State regulations – Each state has different rules for surety bonds.
- Credit score – A higher credit score usually means a lower bond cost.
- Financial strength – Some bonds require business financial records to determine eligibility.
ESTIMATED SURETY BOND COSTS
The table below gives an idea of the annual premiums based on credit scores. The exact cost depends on specific circumstances.
Surety Bond AmountExcellent Credit (675+)Average Credit (600-675)Poor Credit (599 or below)
$10,000 $100 – $300 $300 – $500 $500 – $1,000
$25,000 $250 – $750 $750 – $1,250 $1,250 – $2,500
$50,000 $500 – $1,500 $1,500 – $2,500 $2,500 – $5,000
$100,000 $1,000 – $3,000 $3,000 – $5,000 $5,000 – $10,000
COST OF DIFFERENT TYPES OF SURETY BONDS
6.1 COMMERCIAL BONDS
These include contractor licenses, auto dealer bonds, and mortgage broker bonds. Many require only a credit check, and some smaller bonds may be approved instantly.
6.2 CONSTRUCTION BONDS
These include performance, payment, and bid bonds, which are usually required for construction projects. Business financial statements may be needed for larger bond amounts.
6.3 COURT BONDS
Also known as probate bonds, court bonds usually cost between 0.5% and 1% of the bond amount. The larger the bond amount, the lower the premium rate. A strong credit history is important for approval.
CONCLUSION
Surety bond costs vary depending on credit scores, bond types, and financial history. Understanding these factors can help you find the best bond rate for your needs.
