What is the Typical Bond Price?
The price of a bond depends on the kind of bond that it is. So, let’s go through some of the more common types of bonds and the prices associated with them.
Contract Bond Prices
Contract bonds are those bonds that are written based on some type of underlying contract. The most common types of contract bonds are performance bonds, payment bonds (sometimes combines together as a performance payment bonds) as well as bid bonds. For these bonds, the price is generally three percent (3%) of the underlying contract if the bond is written based upon credit. Most credit based bonds can be written up to $800,000. However, you can get a lower cost bond if you go through underwriting. There is a type of limited underwriting, which can decrease the percentage by a point or two. But if you go through a full underwriting process, then the pricing can go lower.
In addition, large contracts have a much cheaper percentage. For a contract greater than $1 million, with a full underwriting of the company, it is possible to drive the price below one percent (1%) of the contractual price.
Probate and Court Bond Prices
The cost for a typical probate bond and court bond is approximately one-half of one percent (0.5%) to two percent (2%). This is based on the risk of the estate as well as the credit worthiness of the applicant. As you can see, these bonds are generally much cheaper than a contract bond. There is one caveat to this: appellate bond prices. Appellate bonds need a significant amount of capital as the person that is appealing a judgment has already lost the underlying legal action. Thus, the surety will require collateral in an amount to fully assure payment in case they lose again. So, the pricing is not terribly different, but the collateral requirement is significant.
Notary Bond Prices
Notary bond prices are generally priced on a one year or three year pricing. These are almost always fixed fee bond prices. In many cases, you can get these bonds for less than seventy five dollars for a three year term. What a bargain.
Things that can Affect the Bond Price
There are several things that can affect the price of the bond. First, the risk of the underlying matter can easily have an effect on the bond price. For example, if the underlying matter is seen as inherently risky, then the price can increase by a point or two. Another thing that causes an increase in price is the wealth or economic stability of the person that is trying to be bonded. If the company is considered as risky, then the pricing will be increased to compensate for this risk.
The price of a bond can range from one half of one percent to three percent. This depends on the type of bond being underwritten as well as the riskiness of the company or person that is wanting the bond. So, take your time and find the right bond for your company.