By 
The cost of a surety bond usually falls between 1% and 10% of the total bond amount. For example, if you need a Mortgage Broker Bond / Mortgage Servicer Bond for $10,000 and your rate is 1%, you will pay $100. But if your rate is 10%, the cost would be $1,000.
Understanding Surety Bond Costs
The amount you pay for a surety bond is called the bond premium. It is a part of the full bond amount, not the full amount itself. Two main things decide this cost:
- The kind of bond and the coverage it provides.
- The credit history and background of the person or business applying for the bond.
This cost is often called the bond premium or the bond rate.
It is important to know that the bond cost is not the same as the total bond amount. The bond amount, also called the penal sum, is the full coverage needed by law. You only pay a small part of this amount as the premium.
For instance, if a contractor needs a $20,000 bond and the rate is 5%, the cost would be $1,000. However, if a claim is made against you, you could be responsible for the entire $20,000. This is why it’s important to keep your business in good standing.
What Affects the Cost of Your Surety Bond?
Several factors can change how much you pay for a bond. Some of the most common include:
The size of the contract or bond amount.
The type of work or service being provided.
The state where the work takes place.
The personal credit score of the business owner.
The financial condition of the business (this is less important for court bonds).
Each of these can raise or lower the bond premium.
Surety Bond Cost Estimates
Here is a simple idea of bond costs based on credit scores and bond amounts:
| Bond Amount | Excellent Credit (675+) | Average Credit (600-675) | Poor Credit (Below 600) |
| $10,000 | $100 – $300 | $300 – $500 | $500 – $1,000 |
| $20,000 | $200 – $600 | $600 – $1,000 | $1,000 – $2,000 |
| $50,000 | $500 – $1,500 | $1,500 – $2,500 | $2,500 – $5,000 |
| $100,000 | $1,000 – $3,000 | $3,000 – $5,000 | $5,000 – $10,000 |
These numbers are estimates, and actual prices can vary due to other factors like bond length or state fees.
Different Types of Surety Bonds
Commercial Bonds: Often needed for business licenses or permits. They usually rely mostly on the owner’s credit score if the bond amount is below $50,000. Sometimes these can be approved instantly without a credit check for low-risk bonds.
Construction Bonds: Used for construction projects like performance, payment, or bid bonds. Your credit score will be checked for these. For large contracts, business financial documents might be required. Good business finances can help get better rates.
Court Bonds: These bonds are used in legal situations like probate cases. They usually cost less, with costs around 0.5% to 1% of the bond amount. Larger bond amounts often have lower rates. Good credit is usually required.
Summary
Surety bond costs depend on many things, especially credit and the type of bond. Remember, the cost you pay is just a small part of the total bond amount. Keeping your credit strong and business records clear can help you get the best rates for your bond.
Comments