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Surety Bond Cost

Surety Bond Cost

How Much Does a Surety Bond Cost?

Surety bond cost is affected by many factors. If you're looking to obtain a surety bond, Viking Bond Services can provide you with a quote for the cost of a surety bond within 24 hours. The following are a few factors that can impact the cost of your surety bond:

  • Bond amount
  • Type of bond
  • Location
  • Any additional fees
  • The bond company's filed rates
  • The principal's (applicant) credit score

Calculating Surety Bond Cost

At Viking Bond Service, we're often asked, "how much does a surety bond cost?" The simple answer is that it varies. When a bonding company works out a quote for a surety bond, they go through a series of calculations. The result of the calculations determines the base premium of the surety bond; this is the premium amount you will need to pay each year. What many people don't realize is that numerous factors influence a surety bond's cost. There is no set price for a surety bond, and the price will vary from person to person. Here's a closer look at some of the key factors that influence your surety bond cost:

Video: The Cost and Process of Obtaining a Surety Bond.

The Type of Bond

There are many types of surety bonds available. The cost of surety bonds varies between bond types and can also vary between states. The best way to determine how much the bond you need will cost is to request a personalized quote from a credible bonding company.

The Dollar Amount of the Bond

The cost of the bond is heavily influenced by the amount the bond is for. This is the figure the surety will have to pay to the obligee should the bonded work not be completed. A $200,000 surety bond will always cost more than a $100,000 surety bond of the same type.

The Riskiness of the Surety Bond

The cost of a surety bond is calculated based on the risk the bond poses to the surety. In other words, if there is a high risk that the surety will have to pay the obligee because the principal fails to complete the bonded work during the set time period, then the bond cost will be higher. Bond companies will examine business resumes, business financial statements, and the principal's credit score to ascertain how financially secure and reliable a principle is. People with bad credit can still obtain surety bonds, but they might have to pay a higher price.

Calculating the Cost of a Surety Bond: Additional Costs

It's not unusual to see additional fees on top of the base premium for a surety bond. Additional costs often include a broker/agency fee to cover the cost of issuing the bond, credit check fees, and any additional operating costs associated with the bond.

Preparing for Long-Term Surety Bond Costs

Some surety bond requirements expire and do not require renewal. However, many surety bonds, especially commercial ones, need to be renewed because the bondholder must have bond coverage at all times. That means surety bond costs, for many people, are not just a one-time or upfront expense – they are an expense that reoccurs every year.

Renewing a surety bond is a simple process during which the surety that underwrites the bond runs a credit check to see how the bondholder's financial standing has changed since it was last checked. Based on those changes, the cost of the surety bond could go up or down compared to before (or stay the same if credit hasn't changed).

Anyone with a bond requiring renewal (check with the surety for more information) must prepare for the renewal fee. Knowing that it will be approximately the same as the initial surety bond cost, put that amount aside every year. Businesses should make it part of their operating budget.

Managing Surety Bond Costs and Avoiding Claims

It's important to manage and lower surety bond costs (when possible) just like any other expense. There are several ways to do that.

First, by improving credit scores to lower the cost of bond premiums during renewal. Granted, improving credit takes time, and the cost savings are not enormous, but they become substantial when calculated over many years or many bonds.

Second, when it comes to the surety bond amount, it is important to consider more than the premium price. Ultimately, the cost of potential claims is significantly higher than the premium. It's the highest cost in the entire surety bond process. Therefore, it's paramount that you avoid claims by all means necessary. That's why it's vital to understand anything and everything noted in a contract that could result in claims.

If a claim does occur, leading to a settlement, it costs less to settle directly with the obligee rather than relying on the surety to settle. In the latter case, you would be forced to pay back the settlement amount plus interest and fees to the surety. Whenever possible, strive to pay valid claims as quickly as possible.

Bear in mind that owing money to a surety can also lead to lawsuits, which can get expensive quickly. Worse, it can lead to loss of bond coverage and damage someone's record in ways that make it difficult or impossible to obtain a bond again. It could even cost someone their company or their career, underscoring, once again, the importance of avoiding and settling all claims.

Surety Bonds From Viking Bond Services

Here at Viking Bond Service, we aim to provide clients with a quote within 24 hours. We pride ourselves on being honest and efficient, ensuring you get the best and most trustworthy bond service available. Contact us today to get a personalized surety bond cost quote, or call 1-888-2-SURETY (1-888-278-7389) with any questions.

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