Business insurance
Surety bonds and licence bonds
Not insurance at all, despite being sold by insurers. This is the one product on this website where the person paying the premium is not the person being protected, and understanding that changes how you should think about it.
A surety bond is a three-party agreement. You are the principal, the party requiring the bond is the obligee, and the surety company guarantees to the obligee that you will do what you have promised. If you do not, the surety pays the obligee — and then comes to you for every dollar of it, under the indemnity agreement you signed.
That is the whole difference from insurance and it is worth stating plainly, because a great many people buy a bond believing it protects them. It does not. It protects your customer, or the city, or whoever demanded it, and you carry the ultimate liability exactly as you would have without it.
What the premium actually buys
You are not buying risk transfer. You are buying the surety's willingness to lend its credit to your promise, so that the obligee will do business with you. The premium — typically one to three per cent of the bond amount annually for a licence or permit bond with reasonable credit — is a fee for that guarantee, not a transfer of the loss.
Which explains why underwriting looks nothing like insurance underwriting. The surety expects a zero loss ratio and prices accordingly; it is not spreading risk across a pool, it is deciding whether you are good for it. Personal credit, business financials and, on larger contract bonds, working capital and a track record of completed jobs all matter.
The bonds Queens businesses actually need
Licence and permit bonds, required by the authority that licenses you — a New York City home improvement contractor licence is the commonest one in this neighbourhood, and there are equivalents for a range of trades and businesses.
Contract bonds on construction work: bid bonds, performance bonds guaranteeing you will complete the job, and payment bonds guaranteeing your subcontractors and suppliers will be paid. Public work generally requires them and private work increasingly does on larger projects.
And then the miscellaneous ones people meet once: court and probate bonds, lost instrument bonds, and notary bonds. Most are small and quick; the contract bonds are the ones with real underwriting behind them.
Credit, and what to do if yours is poor
On small licence bonds, personal credit does most of the pricing, and the range is wide — the same $25,000 bond might cost $250 for somebody with strong credit and several times that for somebody without. This is the only product on this site where your credit is the dominant factor, and we say so plainly rather than letting the quote come as a surprise.
If your credit is poor, bonds are still generally obtainable through markets that specialise in it, at a higher rate, and the rate improves as the credit does. What we will not do is submit an application that misstates your position — the indemnity agreement you sign makes you personally liable, and starting that relationship with an inaccurate application is a bad idea for reasons beyond the insurance.
Before you sign the indemnity
The indemnity agreement is the document that matters, and it is usually signed quickly with little attention. It typically makes you personally liable, and frequently your spouse too if they sign, for anything the surety pays plus its costs. It commonly gives the surety broad rights on a claim, including to settle without your agreement.
None of that is unusual and none of it is negotiable in most cases. But you should know it before you sign rather than after a claim, which is why we go through it rather than simply sending it over for signature. A bond is a credit instrument and it should be treated with the seriousness of one.
There is no gift for a quote here. There is no gift for a quote here. New York Insurance Law 2324 forbids a producer from offering a rebate, or any inducement not specified in the policy above a $25 value, to win your business. The gift card, the free tablet, the waived first payment and the referral fee paid to somebody who is not licensed are not generosity and not a bargain — they are the thing the statute is about, and they are paid for out of the same premium either way.
Included as standard
How we handle this line
The three parties explained first
Who is protected, who pays, and who ultimately carries the loss — before anything is signed, because most people have it backwards.
The indemnity agreement gone through
Personal liability, spousal signature and the surety's right to settle. Known in advance rather than discovered at a claim.
Credit position stated honestly
It is the dominant pricing factor here and the only place on this site where that is true. You will hear it from us before you see the quote.
Licence requirements checked
The bond amount and form are set by the licensing authority. We confirm the current requirement rather than working from last year's.
Contract bond capacity built
For contractors intending to bid public work, the surety relationship is built over time. Better to start it before you need it.
Renewal tracked
Licence bonds lapse quietly and take your licence with them. We diary the renewal rather than leaving it to the post.
When to ring us
Signs this is worth a conversation
- You are applying for a New York City home improvement contractor licence.
- A public project requires bid, performance and payment bonds.
- A private owner has asked for a performance bond on a larger job.
- You have been asked to sign an indemnity agreement you have not read.
- Your licence bond is due for renewal and you have not been contacted.
- You intend to bid public work in the next year or two.
Surety bonds — what it typically costs
- Annual premium as a share of the bond amount, for a licence or permit bond with reasonable credit. This is the one product on the site where your credit does most of the pricing.1% – 3% of bond
This is a typical premium range for this area. It is not a quote, and it is not our price. We do not set premiums: a carrier files its rates with the Department of Financial Services and our commission is already inside the filed rate, so the same policy from the same carrier costs the same through any producer in New York. What genuinely moves your own number is which carrier writes it, the limits and deductibles you choose, and the facts on your record — which is what we would go through with you before anything is quoted.
Questions we are actually asked
Surety bonds — frequently asked
Is a surety bond insurance?
No, and the difference matters. Insurance transfers your risk to the insurer. A bond guarantees your performance to somebody else — if the surety pays a claim, it recovers every dollar from you under the indemnity agreement you signed. The bond protects the party who required it, not you.
How much does a surety bond cost?
Typically one to three per cent of the bond amount annually for a licence or permit bond with reasonable credit, with a wide spread either side of that depending on credit. Contract bonds are underwritten on financials and track record and are priced differently.
Can I get a bond with bad credit?
Usually yes, at a higher rate, through markets that specialise in it — and the rate improves as the credit does. Credit is the dominant pricing factor for small bonds, which is unusual on this site and which we will tell you before you see the number.
What happens if a claim is made on my bond?
The surety investigates, and if the claim is valid it pays the obligee and then seeks reimbursement from you in full, plus its costs, under the indemnity agreement. It may also have the right to settle without your agreement. This is why the indemnity is the document to read, not the bond.
Related cover
Usually considered alongside this
Contractors insurance
Liability, tools, the vehicle and the certificate the general contractor wants by Friday — plus New York Labour Law 240, which changes the arithmetic entirely.
$1,800 – $9,500
General liability
The policy every landlord and every general contractor asks you for, priced off your receipts and your trade rather than your luck.
$600 – $2,400
Business insurance
The businessowners policy that covers most small Queens businesses properly, and the four risks it is famous for leaving out.
$800 – $2,800
Workers comp
Compulsory in New York from the first employee, with almost no exceptions and a penalty regime that does not care whether you knew.
$0.30 – $18Bring the declarations page and we will read it with you
Ask us what it would cost
Send or bring the summary pages of what you already have — those two sheets are where most of the useful conversation is. We will tell you what we would place it with and what that would cost, what we are paid for doing it, and whether you should move at all. Quite often the answer is that your current policy is priced fairly and you should keep it, and that is an answer we give in writing like any other.