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Performance Bond Cost

The price of a performance bond will vary from contract to contract. There are many variables involved when determining the final rate charged for a performance bond. Because of the variability of the factors involved, the rates for a specific performance bond amount can vary widely.

Typical cost of a Performance Bond

Rates for performance bonds can differ depending on the qualification of the contractor, as well as type and size of the contract. The rate paid is typically a percentage of either the contract amount or bond amount. The average rates and costs can range from 1% - 5%. These are only averages, whereas, a highly qualified Contractor may obtain lower bond rates compared to a Contractor with poor credit issues or financial deficiencies. As a trusted surety bond company, Viking Bond Service, Inc. will always offer the program that is best suited for the Contractor at the lowest rate possible.

Typical Performance Bond amount cost plus fees

In some cases additional fees may be charged for a surety bond. Fees are charged by agencies or brokers in some cases to supplement or replace commissions. In many instances, small commissions must be split between agencies, brokers, and other licensed third parties during the processing of a single Bond file. Basic operating costs and overhead, for instance; overnight fees, charges for credit reports, long distance faxes and phone calls, may contribute to fees charged. There are paid producers who review files and coordinate with Principals, Sureties, and agents during the processing of Bond files. In addition commissions are paid to suitably licensed originating agents and agencies when issuing a Performance Bond in many cases.

How much does a Performance Bond cost?

The exact performance bond cost varies for every applicant. The background and qualifications of the contractor have an impact. Even more important, the contractor's credit score and financial history play a significant role. When someone applies for a performance surety bond, underwriters at the surety use the application materials to evaluate the applicant's risk. Basically, they're trying to determine how likely an applicant is to generate claims or leave them unpaid - and they base that assessment heavily on the applicant's credit. As a result, the performance bond costs are higher for applicants with bad credit. That being said, bad credit doesn't necessarily put performance bonds or any kind of surety bond out of reach - especially with the help of a nationwide surety agency like Viking Bond Service.

How are Performance Bonds calculated?

There are many factors that go into determining the cost of a performance bond, such as (but not limited to):

  • Bond Amount
  • Type and size of contract
  • State where the contractual obligation resides
  • The Surety Company quoting the rate
  • The Principal's credit and/or financial standing
  • The Principal's past job history and work on hand
  • Required and/or necessary fees charged by an agent or broker

What does a Performance Bond cover?

A performance surety bond covers the bonded party's obligation to meet the performance requirements outlined in a contract. If the performance falls short of those requirements - because it's late or over budget for example - the party affected by those failures can file a claim for damages against the performance bond. As long as the claim is valid and based on fact, the surety that issues the bond guarantees the claim will be paid to the obligee. That doesn't relieve the contractor's obligation, though. If the surety must step in to settle a claim, the principal must pay the surety back the full amount with interest and fees included.

Average cost of a Performance Bond

Since the cost of the performance bond depends on the nature of the project, don't try to compare the cost of your own premium to any data you find about average performance bond pricing. Some performance bonds cost a lot and others cost much less based on the project and performance in question. Instead, focus on getting the best rates available from a quality surety you can trust. You could contact various options individually. Or you could rely on a surety agency with national reach like Viking Bond Service to connect you with high-quality options wherever you're located.

Get a quote for Performance Surety Bond Costs from Viking Bond Service

Our contract surety experts will help with any questions you may have regarding performance bond costs or any other type of Bond. We can generally provide an idea of the pricing as well as any other requirements that the potential Surety may have. This provides an opportunity to save time and headaches in the bonding process while potentially opening up a new relationship between the Contractor and Surety. Give us a call today at 1-888-278-7389 for more information regarding Performance Bonds and their associated costs.

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