Many Factors Determine Bond Premiums
There are many reasons that you may be required to obtain a surety bond. They are often required for probate and conservatorships, to obtain a motor vehicle dealer license, to replace a lost motor vehicle title, to fulfill obligations of a contract with the federal government, to haul cargo and freight, to promote MMA fights, to operate an appraisal management company, operate a business to sell durable medical equipment, and even to keep venomous reptiles. They are required for public officials, contractors, wholesale pharmacy distributors, public adjusters, mortgage lenders and many other licensed professions.
Most often bonds are required by municipalities or local governments, courts, state entities and the federal government. They also could be required by a contractor for payment and performance bonds. The amounts of bond limits vary from less than one thousand dollars to millions of dollars and each with varying conditions and obligations.
Bonds also have a degree of “risk.” Some bonds are merely compliance, while others are much riskier and guarantee performance of contract obligations, payment of taxes, honest business practices, protection of others funds, and many other reasons that involve risk for both you and the surety backing the bond.
So we go back to the question, “How much does a surety bond cost?” Since bonds are required for many reasons, have different bond amounts and varying degrees of risk, the price you would pay for a bond known as the “premium” varies greatly. The premium you pay for your bond is often based on your personal credit, financial history, experience in a given job type, business financials and other documents and information depending on the bond limit and obligations. The more the bond limit is, the more premium you should expect to pay.
For instance, a notary bond premium can be as low as $50, requires no credit check, may have a bond limit of $10,000 and is considered less risky than other types of bond. However, an auto dealer would pay more for premium since the bond limits are generally higher, there is a greater risk due to the language and obligations in the bond document, and is dependent on a credit check. So the premium an auto dealer could expect to pay could be as low as $180 or cost thousands of dollars per year.
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