Surety Bond Education

How Much Does a Surety Bond Cost?

How much does a surety bond cost? At Schmalz & Associates, our team provides valuable resources about the ins-and-outs of surety bonds. In this article, “How Much Does a Surety Bond Cost,” we’ll consider the various factors that can affect your surety bond premium as well as what you can expect when you request a surety bond quote.

How Much Does a Surety Bond Cost?

How much does a surety bond cost? To answer this question, we must first consider…

Each bond has a bond amount or penal sum associated with it. The penal sum is often dictated by the Obligee and indicated on the bond form or by statute. The penal sum is then multiplied by your rate to obtain your bond premium. Your rate is figured by several factors that affect surety bond cost. For example, a $10,000 bond at a 3% rate equals $300 in premium.

As a very general guideline, bond rates typically fall between one and three percent of the penal amount of the bond. There are several factors that can impact your rate such as risk of the obligation and your credit quality.

The penal sum of a payment and performance bond is usually the same amount as the underlying construction contract.

Factors that Affect Surety Bond Cost

  1. Credit
  2. Financial Wherewithal
  3. Experience
  4. Risk of the Obligation


With many bonds, your personal credit score has a significant impact in determining your creditworthiness and bond rate. If a bond takes your personal credit score into consideration, the better your credit score is the lower your bond rate will be. It is important to tend to your personal credit score so you can more easily and most cost effectively obtain a bond.

Financial Wherewithal

If you have the financial resources to indemnify the surety should there be a bond claim it will generally be easier to obtain a surety bond. Financial wherewithal comes into play heavily when you are in need of a Performance & Payment bond. The underwriting process will require detailed business and personal financial statements as part of the evaluation.


Another important factor in qualifying for your bond is evidencing your experience in the particular line or scope of work you are engaged in.

Risk of the Obligation

Surety bonds guarantee many types of obligations, from a straight-forward bond associated with your state business license, to a complex construction contract. These various obligations will have varying degrees of risk and this risk will impact the premium charged.

Type of Surety Bonds

Maintenance / Warranty

Payment & Performance Bond cost is calculated on the amount of the construction contract. Sometimes, an Obligee may ask for a bond amount less than 100% of the contract amount; however, the premium is still calculated on the contract price. One year of warranty (also known as maintenance) is included in the premium. Additional years of warranty will cause the premium to increase. The additional years are calculated at the warranty rate. Any warranty exceeding three years is often considered to be undesirable by the surety company.

Work Classifications

Rates for Payment & Performance Bonds are generally determined by the type of construction being performed under the contract. Sometimes the different rate structures will include rate tiers which decrease as the size of the contract increases. The surety industry will classify a contractor’s type of work by class. Some of the classes may be Class B, Class A, Class A-1 or Misc. The surety industry is regulated by the state Department of Insurance. Each surety company must file their rates with the Department of Insurance and be accepted. Each company’s rates are, therefore, public information.

Obligee’s Risk

The Obligee is one of three parties to a bond. We can think of the Obligee as the ‘owner’ or ‘governing body’ depending of what type of bond is in question. Regardless of the type of bond, the Obligee is the party seeking protection under the bond. Whether the owner is a private developer wanting protection against the failure of a contractor on a project, or a State holding a business licensee accountable to follow requirements and regulations, the common factor is an element of risk and the bond protects the Obligee from that risk.

Surety Bond Premium

The surety bond premium is typically paid annually for commercial bonds or per-project for contract bond types.

However, sometimes discounts may be available if you pay for multiple years in advance.

Bond premium is paid prior to the delivery of the surety bond. The bond premium and any additional fees such as shipping fees may be paid by ACH debit from your bank account or by credit card payment.

Surety Bond Quote

When you request a surety bond quote, there are many different factors that can affect your surety bond cost, such as:

  • Personal Credit
  • Business Financials
  • Personal Financials
  • Industry Experience

To begin the process of obtaining a surety bond quote, an application is needed to help understand what type of bond you need. From there, additional information may be required depending on the bond type and the information contained within the application.

Surety Bonds at Schmalz & Associates

Schmalz & Associates offers a variety of resources relating to surety bond services, including:

  • Bid Bond
  • License Bond
  • Maintenance Bond
  • Payment and Performance Bond
  • Permit Bond
  • Subdivision Bond
  • Supply Bond

Learn More with Our Surety Bond Resources

Now that we’ve answered the question, “how much does a surety bond cost,” you should have a better understanding of the various factors that affect your surety bond premium. For any questions regarding payment & performance bonds in Texas contact Eric Schmalz at or 512.640.6444. If you’re interested in learning more about acquiring a surety bond quote, be sure to check out these articles:

External References

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