Surety bond fees
Posted on July 26th, 2010 | by Admin |Surety bond fees
The most important question to be answered before getting a surety bond is about the surety bond fees. As we all know, surety is different from insurance in many ways. One of them is that surety is merely an extension of credit facility to the principal who is holding the bond. Hence, since it is given out to an individual, the surety bond fees also vary from individual to individual. There are a lot of factors which will determine surety bond fees. The most important factor would definitely be the personal credit situation of the principal. In case the surety bond is being issued to a company, then the financial statements of the company, its financial stability and the track record of the business are also considered. Thus, with only the personal credit history of the principal, it would be unfair to expect anyone to give you an accurate figure of surety bond fees. Since surety bond fees are so high in the list of criteria of choosing the right one, most principals are very eager to get a rough estimate at the onset itself, and thus agents are asked this question the most. However, the agents are reluctant to give any sort of figure, the reasons being many. Since surety bond fees depend on a lot of factors, the surety bond fees cannot be decided until the application for the bond has been processed by the agents and the bonding companies. To give an idea, the surety bond fees can vary between 3% and 15% based on the credentials of the principal. Other factors affect the surety bond fees as well. For example, it has been seen that multiple enquiries about the credit history seems to lower the credit rating of an individual. Hence, if your agent does not complete the forms and sends it across to multiple surety companies for getting rates, each of these companies would do enquiries on their own about the applicant’s credit history, thus hampering his rating. Hence, it is of utmost importance that you choose the right agent while applying for surety bonds. The surety bond fees are also based on the contract amount or the penal amount. The penal amount is the maximum amount that the surety is liable to pay in case of a default by the principal and claims are made against him/her. Thus, if the contract amount of the bond changes, the surety bond fees are also likely to change. The surety bond fees are however much higher for bad credit market as the risks associated with these bonds are considerably higher because of the poor financial standing of the principals.
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