How can I get a surety bond?
In order to get a surety bond, there are three steps you need to take:
1) You have to have an obligation that would require a surety bond, which can be any of the following:
A contract with another party where labor will be performed or payment is expected
Contracts for public construction projects in many states require performance and/or payment bonds from parties involved in said projects. Contact your state’s Department of Transportation office for current requirements if you are interested in working on such a project. In other states, contact your state government website for information about local bonding requirements.
2) You will need to complete an application and submit it to a surety company that provides surety bonds. There are only two types of insurance companies: those who provide insurance, and those who provide surety bonds (also known as “surety companies”). Most people don’t know the difference between these types of companies, but they are actually very different.
3) Once you have completed your application, the surety company will review it and determine whether or not to provide you with a bond. Unless your credit is exceptional, it is quite likely that you will be denied for bonding because most companies prefer to work with clients who have excellent credit or are financially stable enough to pay off any claims if they occur.
What are the things needed when getting a surety bond?
In addition, they have to meet certain educational and professional standards which include being board-certified by both local and state authorities. Because this is a requirement, it becomes a condition of bonding so if you want to open up a shop, you must first go through all of the processes.
Just like with doctors or businesses, real estate investors need to be licensed as well before they can legally offer bonds. But most importantly, it should be legally required like in your case. If you do not ask for a surety bond after receiving an award then that is considered fraud and you will face criminal charges.
How much does a surety bond cost?
When you need to purchase a surety bond, there are multiple factors that determine the cost of your bond.
Other factors that affect the price include:
- The amount you want to borrow – The larger your loan request, the greater its perceived risk and thus higher cost – The lower your loan request, the less risk it carries so again the lower cost to insure it up to par should something happen during the course of those transactions
- The type of business or individual – Corporations typically pay higher bond rates than unincorporated businesses or individuals since their credit is generally better and can be backed up by the corporation’s assets should it fail to fulfill its debt obligations (bond claims)
- The amount and types of insurance you carry – If you have a health, auto, homeowners or other policy, having that coverage will lower your premium, but if you’re self-insured (not carrying any other insurance on your property), expect to pay more for your surety bond since there’s no one else backing up your claim should the need arise.
Where you apply matters too; some states charge more than others. Finally, even if you’ve already purchased surety bonds in the past, different underwriters may not price your bond exactly the same.
Where can I get a surety bond?
A surety bond is a contractual agreement between three parties, the principal the person who requires the bond, the obligee the party that will ultimately receive any damages if there are damages to be collected, and the surety company.
The contract outlines what the principal must do in order for their obligation under the contract to be met, in this case, it may say that they must have insurance or certain licenses in place before they can begin a business. If these terms are not met then any money paid out by the surety may be required to cover for all losses up to the amount of the entire number of premiums paid.
Is a surety bond expensive?
In general, though, a surety bond will cost the holder anywhere from 1-5% of the total revenue that they’re expecting to receive from their business activities over a given period of time. Sometimes, depending on the type of business or what it is they want to do, this may be as little as several hundred dollars or as high as tens of thousands.
In conclusion, then, a surety bond can sometimes be expensive depending on what kind you need and how much money you’ll make with it but if you have good credit and already have experience in your field then you should only have to pay a small percentage of your expected future earnings for it.
Although most bonds are not very expensive, they can be expensive and difficult to obtain if you have a poor credit history or no experience. If you need some help understanding how much it will cost to get bonded then click here for more information.