How Does A Surety Bond Work?
Surety bonds are used in a variety of business situations in which additional guarantee for the quality of products or services provided is necessary. They are often required of individuals and businesses who wish to obtain a professional business license, or from contractors who wish to perform work on a construction project.
Surety bonds are an agreement between the bond principal (the business), the bond obligee (the party requiring the bond as an additional guarantee), and the surety bond company that underwrites the bond, and vouches for the reliability of the principal.
Surety bonds provide the option for legal recourse against the bond principal. If the bonded business violates the state statutes and regulations governing their business, and causes financial harm to the obligee, the latter can file a claim against the bond and receive compensation by the surety. Visit our Surety Bond Claims page for more information on the topic.
Main Types of Surety Bonds
Three main types of surety bonds exist that cover a wide range of situations. These are:
- License and permits bonds
- Construction bonds
- Court bonds
Regardless of the type of bond you need to obtain, you must pick the surety bond agency you work with carefully. Agencies work with surety bond companies who provide quotes to surety bond applicants. By working with Bryant Surety Bonds, you will receive your bonds from our highly trusted and reliable A-rated and T-listed surety bond partners. These are the best bonds in the business.
Check out the sections below for more details on the different types of surety bonds. If you want to speak to one of our experts and find out more about surety bonds, call us at (866)-450-3412.
License and Permit Bonds
License and permit bonds are the most commonly-issued bonds. These bond are sometimes also called ‘commercial bonds’. They are required of those who wish to obtain a professional license, such as auto dealers, contractors, freight or insurance brokers, or other businesses.
While all states have different regulations specifying which businesses need to be licensed and bonded, some bonds– like the freight broker bond– are required on a federal level throughout the country.
How much do license bonds cost?
Surety bond cost for license bonds varies according to the type of bond you need to obtain and its bonding amount. The bond amount varies for each license bond, and is typically set by your local government or by the federal government. It represents the full amount of compensation that may be extended to bond obligees who have filed a claim against the bond.
To obtain a bond, you need to pay a percentage of the full bond amount. This percentage is determined by the surety issuing the bond. In determining your bond rate, the surety takes your personal credit score into account as an indicator of your financial stability. It also considers your financial statements, your asset profile, your industry experience, and other indicators. The better these are, the lower the cost of your bond.
There are also options for those with a lower credit score. Our Bad Credit Program enables applicants with lower credit scores to get bonded as well.
How to get your license bond
To get your license bond, apply online here by filling in and submitting your application. Since most states have fixed amount for the license bonds they require, applications for these bonds are processed easily and we will be able to provide you with your free quote soon. After applying for your bond, you can expect to be bonded within a few days.
Find out more about getting bonded from our detailed How to Get Bonded page!
How and when to renew your license bond
License bonds are tied to the professional licenses they guarantee. and have the same terms. If a license is issued for a year, so is the bond accompanying it. Whenever you need to renew your license you will also need to renew your bond.
When it’s time for your bond renewal, Bryant Surety Bonds will remind you well in advance. This way, there is no way for you to miss your renewal deadline. Be aware that your bond rate may vary when you renew, as it will reflect your credit score and personal finances. By improving your credit score you can lower your rate with each consecutive renewal.
Most Popular License and Permit Bonds
Licensed and bonded contractors need to obtain one or a number of construction bonds when bidding for a construction contract, performing work on state or federal projects or on private ones. These bonds guarantee that contractors will perform their work in accordance with the conditions of the contract, and within the timeframe that has been agreed upon.
Types of construction bonds
How much do construction bonds cost?
As with license bonds, the cost of a construction bond depends on its amount. Typically construction bonds have higher amounts, which makes the processing and approval process slightly longer.
The cost of construction bonds is determined on a case-by-case basis. Here, too, personal credit score and finances, as well as previous work experience is of great importance.
How to get your construction bond
To apply for your bond, fill in the relevant construction bond application, depending on the size of the contract you are bidding for or have been awarded.
Approval and processing times for these bonds are slightly longer than for license bonds. We will get in touch with you with your free quote as soon as possible.
The third and last type of surety bonds are court bonds. These bonds are typically requested by a court in one of the following situations.
A supersedeas bond (or appeal bond) may be requested of you if you are appealing a court judgement to a higher court. It guarantees that appellants will cover court costs if their appeal is not successful.
A fiduciary bond or one of its varieties, such as the guardianship bond, is typically required of a probate court when someone is being appointed as someone’s fiduciary, guardian, or trustee. It guarantees their honesty in dealing with the finances and assets of the person they are representing.
Want to talk to us about the bond you need? Call us at (866)-450-3412 to consult with one of our experts or receive help with your bond application.
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