Almost every week we have a call form a customer that says he was told by a friend that the surety bond should not cost more than X, yet we quoted Y. (Our “Y” quote is almost always more than what the “friend” paid.) There are a lot of factors that go into the determining the cost of a surety bond.
Not All Surety Bonds are Created Equal
Some surety bonds carry a greater risk to the surety company than others and so the cost of these bonds will be greater. For instance, a California Tax Preparer Bond can be purchased from Surety1 for $100.00 for five years. This is $20.00 per year for a bond amount of $5k. A California DMV Dealer bond, however will cost, at a minimum, $375.00 per year. The risk associated with the DMV Dealer bond is significantly higher than that of the tax preparer so the rate is higher.
Credit Usually Matters
In most cases, the cost of the surety bond will be higher the lower the credit score of the applicant is. The cost of the surety bond can be ten times higher for some bonds if the applicant has bad credit. It was only a few years ago that there were only a couple of markets for bad credit bonds, now there are a half dozen or more so even this segment is much more competitive hence generally lower rates. Even with the increased competition, much like obtaining a loan, one will pay a lot more for the bond if they have bad credit than if they have good credit.
Experience Also Matters
If a contractor is seeking a performance and payment bond or a small business seeking a license bond, chances are the longer the applicant has been in business the better the rate will be. While there are many non – contract bonds where this does not hold true, every new start contractor will pay more for surety bonds than a contractor with years of experience.
Shop Your Bond! Especially if the bond is provided by an insurance agency.
Most insurance agencies provide surety bonds as a compliment to the insurance. It is not a primary concern and they may not even have surety appointments with more than a few carriers. At Surety1, we represent about 18 different surety bond markets. All we do every day is provide surety bonds to close to 1,000 customers a month. If you want to lower the cost of your surety bond, contact Surety1. Chances are we can lower the cost of your bond and it costs nothing to apply. Take a few minutes and save a few bucks.