How much do surety bonds cost, and who has to buy one?

Two numbers that are easy to confuse

Every bond carries two dollar figures, and only one of them is what you pay.

• The bond amount (the “penal sum”) is the most the surety will pay claimants. The law, a licensing board or a contract sets it. When a board says a contractor “needs a $25,000 bond”, this is the figure it means⁠¹¹.
• The premium is what the surety charges you to issue the bond. It is a rate applied to the bond amount. The federal performance bond, Standard Form 25, has a “Bond Premium” box split into “Rate Per Thousand ($)” and “Total ($)”⁠⁸.

So the formula is: premium = rate per $1,000 × (bond amount ÷ 1,000). Each $1 per thousand of rate costs $25 on a $25,000 license bond, or $2,400 on a $2.4 million performance bond (our calculation).

The rate is the part nobody publishes. No federal or state agency reports what principals pay, and the surety companies we checked don’t post rates either. The Hartford lists the factors it prices on (the bond amount, the type of bond, your financial history and your credit score), but gives no figures⁠¹⁹. The rate is still regulated. Under SBA’s rules, a surety in its guarantee program may not charge more than “the appropriate insurance department” has authorized⁠¹⁰. So the rates sit with state regulators; they are just not published as consumer price lists.

Why a bond is not an insurance policy for you

Surety is regulated and reported as a line of insurance. The NAIC counts it as line 24, and Washington requires contractor bonds from a “surety insurer”⁠¹³⁠¹⁷. But the money flows the other way from a liability policy.

The FAR defines a bond as an instrument signed by the principal (you) and the surety, to guarantee the principal’s obligations to a third party, the obligee. If you don’t meet those obligations, the bond pays the obligee’s loss up to the stated amount⁠¹. The protected party is the project owner, the licensing agency, or the consumers and workers it names. The Hartford puts it this way: surety bonds cover third parties such as customers and suppliers, while insurance policies cover the business owner⁠¹⁹.

The cost consequence is the indemnity agreement. Before issuing a bond, the surety has you sign a promise to repay any loss it pays. SBA requires sureties in its program to obtain “a written indemnity agreement” from each principal, “secured by such collateral as the Surety or SBA finds appropriate”, and lets the surety or SBA require indemnity agreements from other persons as well⁠¹⁰. The Hartford tells small-business customers that after a claim, “the surety will require reimbursement from your business”⁠²⁰. A paid bond claim is a debt you owe, not a loss your premium has covered.

This is also why surety is priced on your finances rather than on an exposure base like payroll or square footage. The surety is underwriting your ability to perform and to repay, much like a lender. In 2025, insurers in the NAIC’s market share report wrote $11.67 billion of direct surety premium (countrywide: U.S. states and territories, Canada and aggregate other alien) with a direct loss ratio of 24.63%. On the same basis the ratio was 69.8% for other liability and 56.99% for all property/casualty lines combined (NAIC)⁠¹⁷.

Who has to post a bond

Bonds fall into two families. SBA’s own terms: contract bonds guarantee that a specific contract is fulfilled, and commercial bonds guarantee that laws and regulations are followed. Government agencies require commercial bonds to protect the public against things like fraud⁠⁹. License and permit bonds are commercial bonds.

Federal construction: the Miller Act

The federal Bonds statute, formerly the Miller Act, is applied through FAR 28.102 (eCFR text as of October 8, 2026). It works in three tiers⁠³⁠⁴:

The contracting officer can accept a smaller performance bond if a lesser amount is adequate. The payment bond can be reduced only by a written determination with specific findings, and it can never be less than the performance bond⁠⁴. The bid guarantee rule is in FAR 28.101-2⁠².

On federal bonds, the surety itself has to qualify. A corporate surety must appear on Treasury’s Circular 570, and the bond amount should not exceed that company’s underwriting limit unless the excess is coinsured or reinsured⁠⁵. Treasury updated the circular on August 1, 2026⁠⁶. The underwriting limitation is 10% of the company’s paid-up capital and surplus as determined by Treasury. A surety writing a larger bond to the United States must reinsure the excess with other certified companies within 45 days⁠⁷. For example, a surety with $40 million of capital and surplus has a $4 million limit. A $5 million performance bond from it needs $1 million coinsured or reinsured (our calculation). That affects which sureties can write your larger jobs. It does not change the formula for your premium.

State and local public works

States have their own versions of the federal law, often called “little Miller Acts”, with their own thresholds. Texas, for example, requires a performance bond on a public work contract over $100,000. It requires a payment bond over $25,000, or over $50,000 when the owner is a municipality. Each bond is “in the amount of the contract” and must be executed by a corporate surety⁠¹⁵. Check the statute in the state where the project is, because the trigger amounts differ from the federal $150,000.

License and permit bonds

Licensing boards set bond amounts by statute, and they vary widely even for the same trade:

Sources: CSLB⁠¹¹⁠¹²; Washington RCW⁠¹³; Arizona statute⁠¹⁴. Arizona residential and dual licensees must also post an additional $200,000 bond or pay into the residential contractors’ recovery fund⁠¹⁴.

California’s contractor bond is filed “for the benefit of consumers who may be damaged as a result of defective construction or other license law violations, and for the benefit of employees who have not been paid wages that are due to them”⁠¹¹. A California LLC licensee also needs liability insurance of at least $1 million, rising by $100,000 for each member of the personnel of record above five, up to $5 million⁠¹². The bonds and the insurance are separate requirements, bought separately.

Federal licensing works the same way outside construction. A freight broker must have a $75,000 surety bond or trust fund in effect, and its FMCSA registration stays in effect only as long as the bond or trust fund does⁠¹⁶. See trucking for the motor-carrier insurance minimums that sit alongside it.

How the surety decides your rate

Because the surety expects to be repaid, its underwriting looks at the principal’s credit and finances, and asks for more information as the bond gets larger or riskier. The Hartford’s commercial surety underwriting guideline (dated January 2017) shows the pattern. It sorts bonds by a hazard code from 1 (most desirable) to 3. For hazard-1 bonds up to $100,000 it needs only the general information on the application, with a full application and credit report for larger amounts. For hazard-3 bonds it needs a full application at any amount and a credit report above $25,000. The grid stops at $500,000. The bond amount counts as a single bond or all bonds for the same principal combined⁠²¹.

Contract bonds add a judgment about whether you can finish the job. SBA describes the test as meeting “the surety company’s credit, capacity, and character requirements”⁠⁹. Its rules list collateral as something a surety may take to secure the indemnity⁠¹⁰.

The levers that come out of these rules:

1. Bond amount

   It is set by law or contract, but you control some of it. Federal performance and payment bonds grow by 100% of every price increase⁠⁴, so change orders raise both the bond and the premium.

2. Personal and business credit

   Credit is a listed rating factor at The Hartford, and its guideline brings in credit reports as the amount rises⁠¹⁹⁠²¹.

3. Hazard class of the bond

   In The Hartford’s guideline, a higher-hazard bond triggers a full application and credit report at lower amounts⁠²¹.

4. Collateral

   A surety may secure the indemnity with collateral, which can substitute for financial strength you do not have on paper⁠¹⁰.

SBA’s Surety Bond Guarantee program

If no surety will bond you on standard terms, SBA’s Surety Bond Guarantee program guarantees part of the surety’s loss. That lets participating sureties bond small businesses “that might not meet the criteria for other sureties”⁠⁹. It covers bid, payment, performance and ancillary bonds on contracts. It does not cover commercial or fidelity bonds, so license bonds are excluded⁠⁹⁠¹⁰.

Sources: SBA⁠⁹; 13 CFR 115.10, 115.12, 115.17, 115.30, 115.31, 115.32⁠¹⁰.

Worked example: a $2.4 million federal job

Our calculation, using the federal and SBA rules above. A small general contractor, not in any of SBA’s 90% categories, bids $2.4 million on a federal building contract that requires a bid guarantee.

1. Bid guarantee

   At least 20% of $2.4 million is $480,000, well under the $3 million cap⁠².

2. Final bonds

   On award, a performance bond of $2.4 million and a payment bond of $2.4 million⁠⁴.

3. Change order

   A $600,000 increase adds $600,000 to each bond, taking both to $3.0 million⁠⁴. If the bonds are SBA-guaranteed, a single change order of at least 25% or $500,000 (whichever is less) needs SBA’s prior written approval, and the contractor’s fee rises with the contract: 0.6% of $600,000 is another $3,600⁠⁹⁠¹⁰.

4. SBA fee, if the bonds are SBA-guaranteed

   0.6% of $2.4 million is $14,400, paid to SBA. The contract is under the $9 million limit, so no contracting-officer certification is needed, and SBA guarantees up to 80% of the surety’s loss. The $2.4 million contract is above the $500,000 Quick Bond limit, so the surety uses the regular application⁠⁹⁠¹⁰.

5. Surety premium

   This is set by the surety’s filed rate. Every $1 per thousand of rate adds $2,400 to the premium on a $2.4 million bond. The form records the rate and total per bond⁠⁸.

If the bonds are called, the surety pays the government or the unpaid subcontractors. You then owe the surety under the indemnity agreement. SBA’s guarantee reimburses the surety, not you⁠¹⁰.

Market trend

Surety pricing barely moved in mid-2026. Brokers in the CIAB survey reported an average renewal premium change of +0.2% for surety bonds in Q2 2026⁠¹⁸. That is an average premium change reported by brokers, not a rate any principal is quoted. For how the surety line compares with others, see the market trends data.

Fidelity bonds are a separate NAIC line (line 23, $1.48 billion of direct premium in 2025, countrywide) and are not eligible for SBA’s guarantee⁠¹⁰⁠¹⁷.

Sources

1. 1
   eCFR, Office of the Federal Register, 48 CFR 28.001, Definitions (Federal Acquisition Regulation) Checked 13 Oct 2026 · Back to text ↑
2. 2
   eCFR, Office of the Federal Register, 48 CFR 28.101-2, Solicitation provision or contract clause (bid guarantees) Checked 13 Oct 2026 · Back to text ↑
3. 3
   eCFR, Office of the Federal Register, 48 CFR 28.102-1, Performance and payment bonds and alternative payment protections for construction contracts: general Checked 13 Oct 2026 · Back to text ↑
4. 4
   eCFR, Office of the Federal Register, 48 CFR 28.102-2, Amount required Checked 13 Oct 2026 · Back to text ↑
5. 5
   eCFR, Office of the Federal Register, 48 CFR 28.202, Acceptability of corporate sureties Checked 13 Oct 2026 · Back to text ↑
6. 6
   U.S. Department of the Treasury, Bureau of the Fiscal Service, Circular 570: Treasury's approved listing of sureties (updated August 1, 2026) Checked 13 Oct 2026 · Back to text ↑
7. 7
   eCFR, Office of the Federal Register, 31 CFR Part 223, Surety companies doing business with the United States Checked 13 Oct 2026 · Back to text ↑
8. 8
   U.S. General Services Administration, Standard Form 25, Performance Bond (rev. 10/2023) Checked 13 Oct 2026 · Back to text ↑
9. 9
   U.S. Small Business Administration, Surety bonds (Surety Bond Guarantee program) Checked 13 Oct 2026 · Back to text ↑
10. 10
    eCFR, Office of the Federal Register, 13 CFR Part 115, Surety Bond Guarantee Checked 13 Oct 2026 · Back to text ↑
11. 11
    California Contractors State License Board (CSLB), Bond requirements Checked 13 Oct 2026 · Back to text ↑
12. 12
    California Contractors State License Board (CSLB), Licenses for limited liability companies (LLC) Checked 13 Oct 2026 · Back to text ↑
13. 13
    Washington State Legislature, RCW 18.27.040, Bond or other security required Checked 13 Oct 2026 · Back to text ↑
14. 14
    Arizona State Legislature, A.R.S. 32-1152, Bonds (contractors) Checked 13 Oct 2026 · Back to text ↑
15. 15
    Texas Legislature, Texas Government Code chapter 2253, Public work performance and payment bonds Checked 13 Oct 2026 · Back to text ↑
16. 16
    eCFR, Office of the Federal Register, 49 CFR 387.307, Property broker surety bond or trust fund Checked 13 Oct 2026 · Back to text ↑
17. 17
    National Association of Insurance Commissioners (NAIC), 2025 Market Share Reports for Property/Casualty Groups and Companies Checked 13 Oct 2026 · Back to text ↑
18. 18
    The Council of Insurance Agents & Brokers (CIAB), Commercial Property/Casualty Market Index, Q2 2026 Checked 13 Oct 2026 · Back to text ↑
19. 19
    The Hartford, Surety bond and insurance solutions (last updated January 28, 2025) Checked 13 Oct 2026 · Back to text ↑
20. 20
    The Hartford, Bonds and insurance for small business Checked 13 Oct 2026 · Back to text ↑
21. 21
    The Hartford, Bond underwriting requirement guideline, commercial surety (January 2017) Checked 13 Oct 2026 · Back to text ↑

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