How Much Does A Surety Bond Cost?

  • 3 min read

So you’ve been told that you need to get a surety bond. Maybe this is for some contract you need to bid on. It might be for some licensing that you’re applying for that requires you to be bonded. In some cases, it’s because of a court case where you have to file an appeal bond or a judgment bond. Either way, a surety bond can be used for multiple different requirements, but it’s almost always something that is an obligation of a licensee or an applicant required by a government agency.

Determining the cost
How much does a bond cost? A surety bond has a premium, the fee that you pay, based on three factors.

  • First, it’s based on the amount that’s being guaranteed. For instance, a fifty thousand dollar surety bond will differ from a twenty thousand dollar one. However, what you have to pay isn’t the entire bonded amount. Consider a vehicle title bond, where you might need a bond for one and a half times the value of the vehicle. Surprisingly, the cost might only be a hundred or two hundred dollars, not the full amount.
  • The second factor can be the creditworthiness of the person being bonded, especially for bonds over a certain amount, usually about twenty thousand dollars. A higher credit risk might increase the bond cost because it poses a risk for the bond issuer.
  • The third factor involves the type of bond needed—whether for a court requirement, a license, a contract bid, a vehicle title, or a professional obligation. Each type carries its own risk but generally falls within the one- to four-percent range of the bonded amount.

Calculating the premium
The bond premium is typically a one-time payment covering a specific duration and is determined by these factors. While estimating the amount, multiply the required bond amount by two or three percent for a rough idea. However, for an exact calculation, contacting a bond agency is the best option. They can accurately determine the bond fee based on the provided information within minutes.

Bond vs. Insurance
A crucial difference: a bond isn’t akin to insurance. If you default on your obligations under the bond, such as issuing a title or fulfilling a construction project, the surety bond company pays out. Unlike insurance, where the payment concludes the matter, with a bond, the company will come after you for reimbursement. The bond company ensures the victim gets paid but will pursue repayment from you for the amount they’ve covered.

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