Finance

HOW MUCH DOES A SURETY BOND COST? A GUIDE FOR AGENTS

UNDERSTANDING SURETY BOND COSTS

The cost of a surety bond is determined similarly to traditional insurance. Underwriters evaluate the level of risk involved and set a premium accordingly. However, surety bonds differ from regular insurance regarding the factors that underwriters consider. This article explains how much surety bonds cost and the criteria underwriters use to assess risk, helping insurance agents better assist their customers.

WHAT DETERMINES THE COST OF A SURETY BOND?

The annual premium for most surety bonds typically ranges from 0.5% to 10% of the bond amount. For instance, a $20,000 bond could cost between $100 and $2,000. This variation in price is due to several risk factors that underwriters evaluate. For more information on pricing and options, visit the Alpha Surety Bonds website.

FACTORS THAT AFFECT THE COST OF A SURETY BOND

3.1 LEVEL OF RISK OF THE BOND

Bonds with a high limit (such as $50,000 or more) and those with a history of frequent claims are considered riskier. As a result, they come with higher costs. This is similar to how insurance companies charge more for properties near the ocean due to the increased risk of storm and flood damage. If a surety company expects a higher chance of paying out claims on a bond, they will charge a higher premium.

3.2 THE APPLICANT’S LEVEL OF RISK

Underwriters assess an applicant’s risk level based on the following factors:

Credit score (checked with a soft inquiry, which does not affect the score)
Business and personal financial statements (required for bonds over $50,000)
Years of business experience
History of bond claims

Surety bonds require indemnification, meaning the applicant must repay the surety company for any valid claims and related costs. Underwriters analyze how likely an applicant is to violate the bond’s terms and their ability to reimburse the surety if a claim arises.

ARE ALL SURETY BONDS UNDERWRITTEN?

No, some bonds considered low-risk are issued without underwriting. For example, notary bonds can cost as little as $38 to $50, depending on the applicant’s state, and are approved instantly without requiring a credit check, financial history, or work experience.

HOW CAN INSURANCE AGENTS GET SURETY BONDS?

Bond Exchange simplifies the process of obtaining surety bonds. Agents can log into their accounts and use a keyword search to find the required bond. If you don’t have an account, you can enroll now to start offering surety bonds to your customers.

Our experienced underwriting team is available to help by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST.

With 40 years of experience, advanced technology, and

extensive market access, BondExchange provides quick and reliable service, ensuring that insurance agents can efficiently assist their clients in obtaining the right surety bonds.