How much does a surety bond cost? Q&A with UFG Surety’s Kyanna Saylor, AFSB

 April 2, 2020     UFG Insurance    Surety 
How much does a surety bond cost

It’s a common question for contractors bidding public projects: How much does a surety bond cost?

As you may know, it depends on many factors including contract amount, scope of project and more. Lucky for us, we’ve got Surety Marketing Manager Kyanna (Ky) Saylor, AFSB, here to answer your questions. 

With more than 15 years at UFG Insurance and in the surety industry, Ky leads all surety marketing efforts and assists in business development. She is helping UFG Surety continue to grow, which now writes business in nearly all 50 states and generated over $30 million in premium at the end of 2019. 

We sat down with Ky to discuss surety premiums, if you must  pay for bid bonds, and additional factors related to the cost of bonds.

Let’s jump right in: How much does a surety bond cost? 

“It’s a great question. Performance and payment bonds are priced based on the contract value, not necessarily the size of the bond,” Ky notes. 

“If the contract amount changes thanks to factors such as change orders or unit pricing, the premium charged to the principal—or contractor—will be adjusted to reflect the change in contract price. Typically, surety bond premiums can range from 0.5% to 3% of the total contract amount.”

Why does the premium vary? 

“Bond premiums in the 3% range typically apply to SBA Surety Bond Guarantee Program participants or new and emerging contractors,” she says. “Veteran contractors, or those that have a good, long-standing relationship with their surety, may see a premium amount less than 3%, but again it depends on a lot of factors. Other variables regarding premium are the contract amount, scope of the project, duration of the project and the contractor.”

Interested in establishing a rock-solid surety relationship? Here are a couple of questions you should consider. 

Is there a charge for a bid bond? 

“In most cases, there is no charge for a bid bond,” Ky says, discussing charges for contract bonds. “Performance bonds often include the payment bond and maintenance bond in their pricing. That’s typical of how we handle bid bonds at UFG Surety, but again every situation is unique.”

What can contractors do to improve their rates and bonding capacity?

“To improve your rates and bonding capacity, it is important to build on the relationship with your agent and the surety company,” she says. “Communication, trust and commitment are required to grow the partnership—from both sides of the table. The organized effort between surety producer, surety underwriter and contractor builds trust, increasing the surety company’s commitment during growth and those difficult times.”

What are additional factors to consider regarding the cost of surety bonds?

Ky discussed a list of other variables that are considered when pricing surety bonds:
  • Subcontractor, supplier and owner references.
  • The ability to meet current and future obligations, both from a financial and backlog perspective.
  • Experience relative to the contract requirements for a project.
  • Necessary and adequate equipment and staffing.
  • Financial strength to support the desired work program.
  • Internal accounting and job costing capabilities.
With all these factors to consider, finding a great surety bond company is key. UFG Surety’s bond experts are always available to help you through the difficult determining factors of establishing surety credit. Contact us today with any questions or assistance you may need!
 

The information provided is for informational purposes only. Every attempt is made to ensure that the information is accurate; however, it is not intended to replace professional advice. For more information, see Disclaimers & Other Legal Documents.