Frequently Asked Questions
What is a Surety Bond?
Surety bonds are agreements in which the issuer of the bond (the “surety”) joins with another party (the “principal”) in guaranteeing work or payment to a third party (the “obligee”).
Obligor/Principal: The individual (that’s YOU) who is required to be bonded by the obligee.
Obligee: The party (person, corporation, or government agency) to whom a bond is given. The obligee is the party protected by the bond. In construction, this is typically the owner or the general contractor.
Surety: A bond company that guarantees the acts of another person.
What Does a Surety Bond Cost for You?
The cost of a surety bond is dependent on the type of the bond as well as the amount of the bond. For a contract surety bond, they start at around 3% and then go down to 0.5% for larger bonds. For some cheaper bonds, like notary bonds, they are only around $45 for 3 years. Notary bonds are less than 1% per year.
What does a Bond Company review when it comes to pricing?
Bond companies are wanting to know that they are not going to have to pay out on the bond. So, what that means is that they would prefer to have a Obligor that is in good financial condition and someone who is known to pay all their bills (i.e., they have a good, clean credit report).