Suppose you discover that you need a surety bond to insure a car with a lost title, to do business in your city, or to become a notary public. What is a surety bond, and how much does a surety bond cost? Read on to find out.
What is a Surety Bond?
A surety bond is a three party agreement between a prinicipal, an obligee, and a surety.
- Principal: the one who needs the bond
- Obligee: the one who is protected by the bond
- Surety: the one who issues the bond
Not sure what kind of surety bond you need? Use this interactive tool to help you out.
An example of a surety bond can be seen best in a contractor example: An obligee (a homeowner) requires a principal (a contractor) to purchase a surety bond to ensure that they complete the contracting job in a timely and cost-effective manner. The contractor will go to the surety (a surety bond company) and purchase a surety bond to promise the fulfillment of the contracting job.
If the contractor fails to fulfill his obligations, the surety bond protects the homeowner from damage and financial loss.
How Much Does a Surety Bond Cost?
The first thing to understand about surety bond cost is that certain types of bonds are more expensive than others. For example, the surety bond cost for a notary public bond is usually quite inexpensive (around $60) while the surety bond cost for an automobile dealer bond can be expensive (anywhere from $1,000-$7,500).
There are three main criteria used in calculating surety bond cost:
- The type of bond
- The amount of the bond
- The risk level of the applicant
The best way to find out how much you'd pay for a surety bond is to get a free quote.
Worried about a past bankruptcy? Check out this post on getting approved with a bankruptcy.
The Range of Costs for Surety Bonds
There are literally thousands of types of surety bonds, each of which has its own cost structure. Your surety bond cost generally ranges from 1% to 15% of the total value of the bond.
For example, if you need a $10,000 surety bond and you get quoted at a 1% rate, you will pay $100 for your surety bond. Higher risk bonds, like construction bonds, may cost 10% or more of the bond's value.
Here are examples of the range of costs for the most popular types of surety bonds:
The Cost of Lost Title Bonds
Lost vehicle title bonds are among the most common surety bonds, and the surety bond cost depends on the value of the vehicle that the applicant is titling. Most states require a lost title bond to be in the amount of 1.5 or 2 times the value of the vehicle you are titling.
So if you're buying a lost title bond on a car worth $5,000, you'll have to buy a lost title bond in the amount of 1.5 times ($7,500) to 2 times ($10,000) depending on your state law. Expect to pay around $15 per thousand dollars of bond value. For example, if you have to buy a lost title bond of $10,000, you can expect to pay around 10 x $15, or $150.
The Cost of Performance Bonds
Performance bonds are typically purchased by construction contractors who have won a bid to complete a construction project. The surety bond cost will depend on the size of the contract and its scope influence. Moreover, many performance bonds have scaled rates that start at, say 1.5% for the first $500,000 and drop to 0.75% for the bond amount in excess of $500,000.
Generally rates range from around 0.5% to 2% of the bond value. Cities specify how large a performance bond a construction contractor must have for a project of a certain size. A bond for a $100,000 contract will typically cost $500 to $2,000.
The Cost of Notary Bonds
Notaries have a certain amount of legal authority, and because of this, many states require them to purchase a surety bond as a demonstration that they will perform their duties according to the law and ethical standards.
Surety bond cost is typically low for notary bonds because this is considered a relatively low-risk service. Depending on the size of the bond a notary is required to have, the cost will generally be $50 to $150 per year.
Pay Less for Your Bond
Getting a bond can be expensive, but it doesn't have to be. At Surety Solutions, our online Bond Cost Calculator lets you view quotes for your bond so you can compare prices before you buy. We are licensed in all 50 states and have relationships with over 30 of the top insurance carriers in the nation. This means we not only can get you bonded but at the best price. Your free bond cost quotes are just a click away.
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