A Helpful Guide to Buying Surety Bonds

Surety Bonds

If you own a business in an industry that serves the public, you may be required by law to obtain a surety bond for the protection of the people you serve. A surety bond ensures that certain contracted and licensed work will be performed correctly and on time. If not, the surety will cover the costs of the loss and possibly assign the project to a new contractor. Remember, the surety bond is not in place to protect the contractor; it protects the public.

Many people do not know what surety bonds are or even know where to buy surety bonds. The purchase of surety bonds is a multi-step process that may take some time. It’s good to have a strong grasp of your business finances before trying to obtain one. This guide will explain the process of purchasing surety bonds.

Find an Agent

Most surety companies sell their bonds through agents and brokers. These agents and brokers are often referred to as the surety bond producers. The producer is a surety bond expert who gives you sound advice throughout the purchasing process. After meeting with the contractor, the surety bond producer puts together the contractor’s submission and sends it to surety companies that are the best fit for the contractor’s needs.

The Underwriter

Once the producer makes the submission, the paperwork goes to the underwriter. The underwriter will review the contractors’ business operations to ensure that the contractor is capable of completing the assigned project. This includes financial records, work ethic, reputation and quality of work. An underwriter may even request to meet with the contractor to gather more information.

Prequalification Process

Every surety bond company has its own regulations for prequalifying a contractor. The prequalification process is one of the longest parts of the process. The underwriter works with the producer to get all of the necessary information. They verify everything and make sure all of the finances and business operations have been handled properly. To make the prequalification process move more smoothly, the contractor should provide:

  • Information on key employees including resumes, lists of duties, and salaries
  • Comprehensive business plan
  • History of completed jobs as well as a list of jobs in progress
  • Evidence of a bank line of credit
  • Financial Statements


If the bond is approved, then the surety expects the contractor to uphold their end of the contractual agreement. Once the bonds are written, the surety will ensure that the progress of the contractual obligation is moving smoothly and on schedule.


The prices of surety bonds vary from state to state and depend on the type of bond you need. Premiums can range from anywhere between .5% and 15% of the bond’s total value.  The surety bond producer will work to ensure you get the best deals on your bonds.

Hopefully this guide will make the surety bond process a little clearer for you. If you need to purchase a surety bond, contact a surety brokers and request a surety bond quote to see the bond amount you’re eligible for.