The Importance of Surety Bond Cost
For many contractors obliged to use a surety bond, calculating the cost can at times be an issue. It is important that you don’t take the one size fits all stance when it comes to surety bonds. The best way to understand this issue is to view a surety bond’s cost as a small percentage of the bond amount required of you, with the exception of contract bonds for public jobs, which are based on the full contract amount.
You must keep in mind that the cost of a surety bond can vary drastically. So in order to have a better comprehension about calculating the cost of a surety bond, you can consult the following surety bond cost infographic. By following the listed steps you will be able to have a better understanding of which surety bond you need, how the pricing is determined and most importantly what can you do to insure lower rates. And don’t forget that the percentage that determines surety bond prices will be based on your rate.
In order to understand the infographic just a bit better, some additional knowledge is required regarding surety bond types.
So lets just go over the type of bond you might need, as there are a lot of different bond requirements throughout the U.S. It is important to keep in mind that purchasing the wrong one could mean that you will be rejected by the obligee.
Types of Bonds
You need a contractor bond if your bond is for a specific contract, keep in mind that any jobs over $100,000 require bonding due to the Miller Act.
In case your bond is not for a specific contract, it falls under one of the following categories:
- Court Bonds, you need to get this type of bond when you are required to do so by the court.
- Fidelity Bonds, this type of bond provides insurance for your company and is not required by anyone.
- Finally, we come to license bonds/miscellaneous bonds, you need to get these bonds when it is required of you. This is not related to a specific contract rather the situation when you want to get a license or permit, this is why they are also known as non-contract bonds.
When you have the right bond, you can much more easily navigate through the process of understanding the cost determination. Additionally, if you still have doubts, reaching out and contacting a company that specializes in providing surety bonds is a good option since they might be able to negotiate more flexible underwriting criteria on your behalf. In addition, they can be able to provide you with tips for getting the best possible rate.
Surety bond, as a topic, still brings out a lot of questions, and if you are not in the industry it can at time be confusing. By using tools like infographics and videos a lot of surety agencies are trying their best to explain better the process of choosing the right surety bond, determining its cost and obtaining it for your business. Any of these tools can be quite helpful for helping you understand the process.