A surety bond is a contract among at least three parties wherein the surety agrees to uphold the contractual promises and obligations made by the principal if the principal fails to uphold its promises to the obligee. The surety bond protects the obligee against losses resulting from the principal’s failure to meet the obligation. The principal will usually pay a premium annually in exchange for the bonding company’s financial backing and strength to extend surety credit.

Surety bonds are required by a wide range of business. There are over 50,000 types of surety bonds in the United States and finding the exact bond you need can be difficult. Almost all surety bonds are required at the state level and regulations can vary greatly from state to state. Some example of businesses that need surety bonds are below.

• Automotive dealers
• Independent contractors
• Construction companies
• Contractors

Surety bond costs can vary widely and depend on several factors such as the principal’s financial status, the type of bond, the surety company, your credit, and your project history. Depending on the amount of the bond, costs can range from 1-3 percent of the total project cost.