Surety Bonds Frequently Asked Questions

Have questions about surety bonds or how BondAbility can assist you? You're in the right place. Below, we've answered the most common questions — covering everything from how surety bonds work to what makes our BondAbility process different.

Frequent Asked Questions

What is a Surety Bond or Definition of Surety Bond?

Technically speaking, a surety bond is an insurance product, but the similarity ends there. Unlike an insurance policy, a surety bond does not protect the person purchasing the coverage, but instead it protects some third party. If you are reading this, chances are some entity asked you to get a bond. That could be a state licensing authority like a Liquor Control Board, or the Division of Motor Vehicles, or a Court. Literally any entity can require a bond of another. In all cases, the bond guarantees that you, the purchaser (Principal), will perform as required by the third party (Obligee).

Are there different types of surety bonds?

Yes! There are two categories of surety bonds; contract and commercial. A contract bond allows for financial security by assuring the third party (obligee) that the purchaser (principal) will perform the work, in addition to paying for subcontractors, suppliers, etc. Contract bonds include bid bonds, maintenance bonds, payment bonds, performance bonds etc. Commercial bonds guarantee performance of the principal to the responsibility described in the bond. Commercial bonds include license and permit bonds, public official bonds, probate and judicial bonds as well as miscellaneous bonds.

Why is a surety bond needed?

Surety bonds are required for many reasons, such as operating a business, obtaining a license or to fulfill a requirement for local or state governments. The primary function of a bond is to protect the general public by guaranteeing that an individual or business will abide by the contract terms.

Is a surety bond the same as insurance?

The only similarity between a surety bond and an insurance policy is that they are both a means of transferring a risk and provide for financial loss. An insurance policy transfers risk from a policy holder to an insurance company, whereas a surety bond protects an obligee against losses, not a policy holder.

Insurance policies are two party agreements (insured and insurer); surety bonds are three party agreements (principal, obligee, surety). Insurance companies are prepared and structure their premiums in order to anticipate losses whereas a surety company does not expect losses to occur under a bond. This is why there are strict underwriting guidelines for some bonds.

Additionally, both surety bonds and insurance policies are regulated by the individual states.

How or where can I get a surety bond?

You can typically obtain a surety bond through licensed insurance agencies that partner with various surety companies. However, because surety bonds are a specialized financial instrument, not all insurance agents possess the in-depth knowledge required to properly assist you. Alternatively, you can turn to specialists like BondAbility. We focus specifically on surety bonds, offering expertise and access to a wide range of surety solutions to help you secure the bond you need.

What types of surety bonds does BondAbility handle?

Because BondAbility is a dedicated surety bond agency, we have the expertise and resources to handle virtually all types of surety bond requests. This includes a wide spectrum, such as:

Contract Surety Bonds: Like bid bonds, performance bonds, payment bonds, and maintenance bonds, often required for construction projects.
Commercial Surety Bonds: Covering a diverse range of needs, including license and permit bonds (for various industries), court bonds (such as administrator or executor bonds), notary public bonds, and tax bonds.

What does a surety bond cost?

The cost of a surety bond, or the premium, can fluctuate significantly based on several key factors. These include the specific surety company underwriting the bond, the financial qualifications of the applicant (such as credit history and financial stability), and the classification of the bond itself (whether it's a license and permit bond, a contract bond, a probate or fiduciary bond, or a fidelity bond, among others).

Generally, for license and permit bonds, you might expect the premium to range from as low as one-half of one percent to around two percent of the total bond amount. Probate and Fiduciary Bonds, on the other hand, are typically quoted using a sliding scale, meaning the premium isn't usually a fixed percentage of the bond amount.

At BondAbility, we understand that securing a surety bond needs to be both affordable and efficient. We work diligently to provide you with competitive rates and a streamlined process to get you bonded quickly. Our expertise across various bond types and our relationships with multiple reputable surety companies allow us to find cost-effective solutions tailored to your specific needs.

How long until I receive my surety bond from BondAbility?

At BondAbility, we pride ourselves on fast, efficient service to our customers. All bonds are processed within two hours. Orders received by noon are mailed that day! We also have instant electronic mail and overnight delivery available for your convenience.

What is BondAbility's Privacy Policy?

All information submitted to BondAbility.com will be held confidential and will be used for the sole purpose of communication or in preparation of a surety bond or insurance product. BondAbility.com will not sell, rent, swap or otherwise disclose confidential information to any third party. BondAbility accepts no liability for information that may be intercepted by unauthorized acts of a third parties.

What is BondAbility's Return Policy?

Surety Bonds are legal documents and as such the premiums charged are fully earned upon issuance. Return premiums can only be allowed in those rare cases where original bonds can be returned unused and it can be demonstrated to our surety company's satisfaction that they have incurred no liability.