The cost of a surety bond is called the surety bond premium and depends on several factors including:
- Surety Bond Type: Different types of surety bonds represent different types of risks to the surety company. The risk on a surety bond is that the principal will default and the surety company will have to pay the bond amount to the obligee. The lower the risk the lower the cost of a surety bond. For example, license and permit surety bonds are in general less risky than construction surety bonds.
- Surety Bond Principal: Similar to credit card rates, surety bond applicants are evaluated based on available information, including personal and/or business finances, and the results affect the rate given to the applicant. Because of this, not everyone receives the same rate even though they may have the same type of surety bond.
- Surety Bond Company: Surety companies can judge risk differently. Therefore the cost of a surety bond may vary from one surety company to the next.
Surety Bond Underwriter. Individuals have different perspectives and risk tolerances. So one underwriter may judge a particular bond to have more or less risk than another, which can affect the premium.
- Surety Bond Obligee: The obligee determines the surety bond amount. A higher surety bond amount carries more obligation and therefore more risk for the surety company so the premium is typically higher.
Standard surety bonds range from 1-5% of the bond amount. Some surety bond types with less risk can cost less than 1% while high risk surety bonds can cost 5-20%. Some surety bonds can also require collateral to be given in addition to the premium.