How to Get a Surety Bond
A variety of industries across the U.S. require professionals to get a surety bond for licensing, daily operations, and other business-specific needs. This results in hundreds of different surety bonds.
However, while surety bond types may vary, the good news is the process for applying for a surety bond is similar across the board. From what a bond guarantees to the step-by-step process for getting one, we cover all the details below.
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What is a Surety Bond?
A surety bond protects your customers (or government agencies) from financial loss. It is a financial guarantee that you will follow laws, regulations, and contractual obligations. In short, you can think of a surety bond as a line of credit that you need but hope never to use.
There are three parties involved in every bond:
- The Principal: (you) whoever needs to purchase the bond and complete the task or obligation.
- The Obligee: (often a government agency) the one requiring the principal to get the bond.
- The Surety: (us) the insurance or surety company guaranteeing the principal can fulfill the obligation. They back the principal financially with the surety bond.
If the principal fails to follow laws or complete obligations, the obligee can file a claim against the bond for damages. If a claim is deemed valid, the surety initially reimburses the obligee. However, the principal is then required to pay back that full amount.
For more information, see our most frequently asked surety bond questions.
What Are the Different Types of Surety Bonds?
While there are hundreds of types of surety bonds, in general, three categories of surety bonds exist. These broad surety bond types include:
- License and permit bonds – required to secure certain business licenses and permits in order to legally operate. For example, motor vehicle dealers need auto dealer bonds and contractors often need contractor license bonds. Other professions requiring these types of bonds include lenders, auctioneers, tax preparers, freight brokers, and mortgage brokers.
- Contractor bonds - individuals or businesses (construction companies, licensed contractors, subcontractors, etc.) working on public construction projects are likely required to obtain a contractor bond. This category includes commercial bonds such as bid bonds, payment bonds, performance bonds, maintenance bonds, contract bonds, and construction bonds.
- Court bonds - certain courts require these bonds for a variety of purposes. This includes probate bonds and fiduciary bonds.
Fidelity bonds are also worth a mention as they are a common necessity. However, it is important to note that they don’t fall into the three main categories since they don’t work like a traditional bond. Instead, these bonds work similarly to a traditional insurance policy—protecting the principal (business owners and their clients) from financial loss.
How Much Does a Surety Bond Cost?
A surety bond costs a fraction of the total bond amount. Those with good credit can expect a premium of 1% - 10% on most types of bonds.
For example, a $25,000 bond will cost approximately $250 to $2,500.
Are Surety Bonds Hard to Get?
No. Most surety bonds are easy to secure and only require basic information like your contact information and the bond type/amount required. Underwriters will look at your application, along with your credit history and any past bonding history, to assess your rate and eligibility.
Can I still get a bond with bad credit? Yes, in many situations you can still get bonded with bad credit. However, since poor credit weakens your financial strength and marks you as a higher risk, your bond premium may be more costly. Additionally, small businesses with bad credit may have trouble securing contractor bonds. Therefore, they often need help from a bond program like SBA.
What is the Process for Getting a Surety Bond?
1. Know Your Needs
You will need to know the bond you require and the amount. You can confirm this with the obligee (the one requiring the bond). Additionally, you can search your surety bond requirements by state.
2. Find a Reputable Bond Company
It is essential to choose a bond company that is licensed to conduct business in the state your bond is required. You will also want a reputable company to ensure that you have the support you need if a bond claim ever arises.
3. Fill Out an Online Bond Application
The easiest way to apply for a bond is to fill out an online form for a free bond quote. It takes minutes and is the quickest way to get bonded (often within a day or so). Our quotes are no obligation, take 5 minutes, and you will be able to lock your rate for the next 90 days (in case you want to purchase the bond).
Note that the bonding process may take longer for larger bonds or certain types. For such cases, supplementary information, such as financial statements, may be required.
4: Sign the Agreement & Pay
Sign the indemnity agreement and paperwork, email or fax it back to your bond provider, and pay your invoice online. Once everything is processed, you will receive an email copy of the surety bond. Additionally, the original bond will be sent to you in the mail.
How Long Does It Take to Get a Surety Bond?
On average, 1 - 2 days.
While some surety bonds take longer to process, the majority can be issued within a day or so. Look for a bonding company that offers instant estimates and online bond forms for the quickest results.
How to Renew a Surety Bond
The process to renew your bond is similar to the initial application process.
- Contact your surety provider when your bond is up for renewal. Often you will receive a renewal notification, but it is ultimately up to you to ensure your bond is up to date.
- You may be required to provide supplemental documentation or information for the underwriting process—especially if there are changes to your bond. This may include financial documents and your credit score.
- Sign the agreement and pay your bond fee. The majority of the time, your rate will remain unchanged from the previous bond contract.