As a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Written By Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Jason Metz Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others mak.
Lead Editor, InsuranceUpdated: Oct 18, 2023, 7:42am
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If you perform contract work as a small business owner, there’s a good chance you will need to purchase a surety bond. A surety bond protects you against the costs of claims about shoddy, incomplete work as well as theft and fraud. You may need to purchase a bond as a means of getting a business license or permit.
A surety bond is a contract between three parties:
For example, let’s say a construction contractor buys a surety bond at the request of a client. If the work is shoddy and insufficient, the client (obligee) may file a claim with the surety for the cost of hiring another contractor to re-do and finish the work in a proper manner.
The cost of a surety bonds is calculated as a percentage of coverage, and this percentage could be as much as 15%. This percentage is paid as an annual premium. For example, the median premium for a surety bond is $8 per month for Insureon’s small business customers.
How much a surety bond ultimately costs depends on your company’s industry. For example, construction companies pay a higher rate on surety bonds. Here are key factors that affect the price of surety bonds:
In many cases, the Small Business Administration (SBA) guarantees surety bonds in an effort to help small businesses compete for jobs with other businesses. It’s worth considering the SBA when you are taking out a surety bond for a contract job. The SBA charges a bond guarantee fee of 0.6% of the contract price.
Surety bond requirements vary based on laws and regulations at the federal, state and local level. These bond requirements also differ based on the specific requirements of the obligee. For example, obligee requirements could be the details of a construction project for a bond with a construction contractor. Review these requirements carefully before purchasing a surety bond.
Here’s a look at four common types of surety bonds.
Your business needs credit to qualify for a surety bond. Limited capital and limited credit may make it difficult for a small business to be approved for a surety bond.
To qualify for a surety bond, you will need:
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Lead Editor, InsuranceAs a former claims handler and fraud investigator, Jason Metz has worked on a multitude of complex and multifaceted claims. The insurance industry can be seemingly opaque, and Jason enjoys breaking down confusing terms and products to help others make well-informed decisions.
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