A surety bond is a legally binding agreement between three parties - the obligee (the party requiring the bond), the principal (the party required to get bonded), and the surety company. It guarantees to the obligee that the principal will carry out their obligations according to their license or contract. The surety bond is put in place in order to protect the public and the party requiring the bond.
The cost of a surety bond varies depending on several factors, such the type of bond, the state in which the bond is meant to serve, credit score and more. The actual cost that needs to be paid is a percentage of the total bond coverage and can be anywhere between 1%-15% of the bond amount (for most license bonds).
If you are new to bonding, here you can learn the in’s and out’s of the bonding process as well as the most important piece of information you will need to provide in order to apply for your surety bond. This information will not just make the process smoother, but it can also help you reduce the cost of your surety bond.
A surety bond is not an insurance. These are two completely different terms. An insurance protects your business, whereas a surety bond protects the public. If you want to get Bonded and Insured, the insurance aspect could refer to Fidelity Bonds, which protect your business from employee dishonesty.
If you can't find the answers you need, visit our FAQ page where we try to answer all common and uncommon surety bond questions. We cover a few main categories of questions related to bond pricing, the application process, surety bond issuance, and bond renewals.
The surety bond rate is the percentage that needs to be paid from the total bond amount. Learn more about bond rates, the main factors determining your bond rate and how it varies across different types of surety bonds.
When starting a new business, one of the most important steps is getting bonded and insured. This page serves as an explanation for the process of becoming insured and bonded, however you can reach out to us directly with any additional questions.
Whenever you’re asked to obtain a surety bond, you will need to make sure it is backed by a reliable surety bond company at the best price possible. Getting bonded with the wrong company can cause higher annual bond rates, delays, or even leave you with a surety bond which is not backed. Learn more how to determine whether the company that supplies your bond is reliable.
The penal sum of your bond, also known as the total bond amount, refers to the maximum compensation you may owe under the bond's agreement. The penal sum only applies if there is a valid claim against you.
Surety bonds have many advantages over a bank letter of credit, such as coverage, cost, duration and guarantee the completion of a project. Lean more about the difference between surety bonds and bank letters of credit.
It's a standard practice in the surety for the prinicpal to sign an indemnity agreement with the surety. The indemnity agreement guarantees that the surety will get reimbursed if it has to extend compensation to claimants on behalf of the principal.
Sometimes principals need to change the information on their bond form, whether it's because they made a mistake or because there's a change that needs to be reflected, such as a name or address change. In cases like this, you need to get a bond rider.
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