The Expert Podcast

…So you've been told that you need to get a surety bond Maybe this is for some contract you need to bid on It might be for some licensing. That you're applying for that requires you to be bonded. In some cases it's because of a court case where you have to file an appeal bond or judgment bond. Either way a surety bond can be used for multiple of different, requirements but it's almost always something that is an obligation. Of a licensee or an applicant that's required by a government agency. So how much has a bond cost? Well assurity bond. Has a premium that's the fee that you pay. That's based on three factors. It's based first on the amount that's being guaranteed. For example if you have to buy a $50,000 surety bond that's going to be different than a $20,000 surety bond Now keep in mind that what you have to pay Isn't the $50,000. For example many vehicle title. processes require. A vehicle title bond, and they say, that you have to buy a bond for one of the half times the value of the vehicle Well if you have a $10,000 vehicle, One and a half times is 15,000 A lot of people think you have to pay 15,000 for the bond but you don't. In fact that bond will probably only cost you a hundred or maybe $200. The other factor that goes into the bond is in some cases the credit worthiness of the person that's being bonded. So…if. It's a bond over a certain amount usually over about 20,000. And you may find that your credit comes into how much the bond is going to cost because that's a risk for the bond issuer. The third factor is what type of bond is it? Is it for a court? requirement is it for a license is a for a contract on a bid. Is it for a vehicle title? Is it for some type of a professional obligation? And each one has a little bit different risk, but. They're all in the same ballpark. As a rule of thumb. Most bonds cost between one and 4% of the bonded. amounts as an example. If you have a $20,000 bond. And the, the bond rate for that particular instrument is 2% that bod will cost you $400. If you have a $50,000 bond. And that bond rate is 1% that's going to cost you $500. So the bond premium is usually a one-time premium that covers you for that duration. And it's based on those three factors the amount of the bond, the credit worthiness, and the type of bond Now what's the easiest way to calculate the amount. Just call a bond agency, the bond agency or the bond producer can calculate your bond fee to the penny. Based on the information that you give them. So if you want to get a rough idea, You know take the bond amount that's required. Multiply at times maybe two, 3% to be on the safe side. and that'll give you a rough. If you want an exact amount just call the bond agency They can tell you instantly, or within a few minutes, how much your bond fee is going to be. That bond premium. It's usually a one-time premium for a certain duration or certain obligation. Keep in mind too that. bond is not like insurance So if you default on the obligation that you have under that bond, maybe to issue a title maybe to finish the bridge you're building maybe two. perform your license duties properly. If you default on that, if the bond company pays out, it's not like your insurance policy If you have an insurance policy, let's say and you crash your car and you injure somebody, your insurance pays that person. And that's the end of the story with a bond If the surety bond company. Pays out on your obligation. Now they come after you to get paid back So it's not like insurance you're still obligated. But that bond company is just there with deep pockets to make sure that the victim gets paid