Surety bond costs are primarily determined by the value of the bond. Your industry risk and credit rating can also affect the premium.
For Insureon's small business customers, the median cost of a surety bond is $8 per month, or about $100 annually. The median coverage selected by customers for a surety bond is $10,000, and most bonds last for one year.
Most small business owners (55%) pay between $100 and $200 per year for a surety bond and 16% pay less than $100 per year. These figures were derived from an analysis of bonds purchased by Insureon's customers.
The price of a surety bond is a set percent of the bond amount. Several factors affect how much you'll pay, including:
A surety bond is more similar to a line of credit than an insurance policy. The money must be paid back if you use it. That's why your personal credit score is important.
As part of the bonding process, the surety company's underwriters will look at the applicant's credit report and financial statements to determine how much to charge. A poor credit rating will increase the amount you pay. Most bonds cost between 1% and 3.5% of the total bond amount, depending on your credit status.
If you have poor credit, you can probably still get a bond – however, the cost will be higher. Having a clean credit history helps keep costs low, as it shows the surety bond company they can count on you to pay back the amount if needed.
Insureon’s analysis of surety bond costs shows that a business’s industry and the type of bond, such as construction bonds or janitorial bonds, can impact the overall bond price.
Higher risk businesses, such as construction companies, may have to pay a higher percentage of the surety bond amount (for example, 10% or more) as a premium. Surety bond rates for a lower risk business could be as little as 1% of the bond's value.
In addition to paying a higher rate, some professions, such as auto dealers, also need bigger bonds because of their profession's sizeable risks. This is often dependent on your state. For example, California requires a motor vehicle dealer bond of $50,000.
In general, the premium you pay for any commercial bond primarily depends on the total bond amount. For example, a bonding company might decide to charge you 1% for a surety bond. That means a $2,000 bond would cost $20, and a $10,000 bond would cost $100 annually.
Even within your profession you may see different types of surety bonds, which may have different bond requirements and costs. Other types of bonds include:
Insurance premiums vary based on the policies a business buys. See our small business insurance cost overview or explore costs for a specific policy.