Businesses and individuals in Florida are required to post a surety bond for a wide variety of situations. Once you are informed that you need to get a bond, it is important to begin researching the specific bond requirement.
In this Florida surety bonds guide, we will examine how surety bonds work including how much they cost and who needs to get bonded. We will also outline the specific bonding requirement for several popular surety bonds.
Florida surety bonds basics
A surety bond is a three-party contractual agreement between the entities:
- The principal: The party required to get the surety bond
- Obligee: The party that sets the surety bond requirement
- Surety: The company that issues the surety bond
The bonds are put in place to guarantee that the principal adheres to certain conditions. These conditions will vary depending on the nature of the bond. Typically, the conditions are to comply with state laws related to the business to which the bond pertains.
How do Florida surety bonds work?
Like insurance policies, surety bonds are a form of financial protection. Unlike an insurance policy—which provides protection to the policyholder—surety bonds provide protection to the entity requiring the bond as well as to the general public. Certain surety bonds protect specific parties such as customers or suppliers.
When the surety company issues the bond, they agree to provide financial protection in the event the principal violates the bond agreement. If a party is damaged financially by the principal’s violation of the bond agreement, said parties can file a claim against the bond. These claims can not exceed the value of the bond.
If the claim is valid, the surety company will pay damages to the affected party. The principal is ultimately responsible for repaying the surety.
The official bond documents usually contain a one or two-page form. This is the actual contract and includes information about the principal, the surety company, and the surety agent. The form also details the obligation of the bond. A power of attorney form also accompanies the bond form.
How much do surety bonds cost in Florida?
When the Obligee sets a bonding requirement, they also set a required value for the bond. This amount is the maximum that the surety company agrees to pay in the event of a successful claim. The obligee sets the bond value based on what it feels is an appropriate amount of coverage given the nature of the bond.
It is important to know that the bond amount is not what you pay for the bond. Like an insurance policy, principals only need to pay a portion of the coverage amount as a premium. The surety company is responsible for setting the premium amount for the bonds that they issue.
There are several factors that will impact the premium for a bond. First and foremost is the type of bond. Some bonds are riskier than others. When a bond is risky, the surety company will require a higher premium to offset the heightened risk.
For some bonds, all principals will receive the same premium. For others, the surety company will assess your individual qualifications to determine the premium. When underwriting individual bonds they will look at your credit score, financial standing, work experience, and other factors.
Strong credit, financials, and industry experience lead to lower premium rates. If you have bad credit, it is still possible for you to get a bond. To do so, you must find a surety company with flexible bonding options.
The average premium rate for surety bonds can range between 1% and 15% of the bond amount. The huge difference is largely due to the bond type.
What kinds of bonds are required in Florida?
Florida surety bonds fall under one of the following categories:
License and permit bonds
License and permit bonds are required in Florida as part of the licensing process for various professions. The bonds are put in place to ensure that the principal conducts ethical business practices while demonstrating a commitment to financial responsibility.
Examples of popular license bonds include notary bonds, freight broker bonds, and contractor license bonds.
Court bonds are required for certain legal proceedings. There are two primary types of court bonds.
First, there are judicial bonds. These are used to limit financial losses that could result from a court ruling. Second, there are probate bonds. These are required when a fiduciary is appointed to run an estate.
Contract bonds are required for those looking to bid and work on construction projects. The bonds are typically mandated for projects large and small on both the federal and state level.
There are three types of contractor bonds:
- Performance bonds: Guarantee that the contractor completes all work as required.
- Payment bonds: Guarantee that the contractor pays all subcontractors, laborers, and suppliers on time.
- Bid bonds: Guarantee that the contractor will not charge above the amounts specified in their project bid.
Common Florida surety bonds
Here are the bonding requirements for some of the most popular surety bonds in Florida:
Contractor License Bonds
Various counties and municipalities in Florida require different contractors to get a surety bond before they can operate. The bonds are put in place to ensure that contractors adhere to all city laws and building codes. The required amounts for these bonds will vary but will not exceed $25,000.
Below are a few examples of popular contractor license bonds in Florida:
- Osceola Contractor’s Bond: $5,000
- Orlando Contractor’s Bond: $5,000
- Palm Beach County Contractor License Bond: $2,000
Auto Dealer Bonds
All Florida motor vehicle dealers are required to obtain a Florida motor vehicle dealer bond before receiving a dealership license. By getting the bond, dealers guarantee to represent all vehicle conditions accurately, obey Florida vehicle sales laws, and pay all applicable taxes.
There are a variety of dealer license classifications, each requiring a unique bond. However, all auto dealer bonds in Florida have a $25,000 required bond amount.
To get a Florida dealer license, applicants must do the following:
- Have a business location approved by a regional compliance examiner/officer
- Complete the department-issued application form
- Pay the fee of $200 for each main location
- Post a $25,000 surety bond
- Provide a copy of the location lease or proof of ownership
- Provide a copy of a pre-licensing dealer training course completion certificate from a department-approved Dealer Training School
- Provide the sales tax number and federal employer identification number
Public Adjuster Bonds
To operate as a public adjuster in the state of Florida, you need to get a public insurance adjuster license along with a surety bond. The Department of Financial Services has set the bonding standard to ensure that adjusters comply with all regulations in the Florida Statutes.
The required bond amount for these bonds is $50,000.
Yacht and Ship Broker Bonds
Businesses and individuals in Florida need to get a yacht and ship broker license to sell yachts and other aquatic vessels. Part of the licensing process is to get a $25,000 surety bond. There is a separate $25,000 bond for individual yacht salespersons.
Collection Agency Bonds
The Financial Services Commission of Florida requires collection agencies to get a $50,000 surety bond. By posting the bond, the debt collector agrees to abide by all standards in the Florida Statutes.
Collection agency bonds in Florida remain in full force and effect until otherwise canceled.
Mortgage Broker and Lending Act Bonds
The Florida Office of Financial Regulation requires mortgage brokers and lenders to post $10,000 surety bonds prior to working in the state. The bonds help ensure that principals meet all duties listed in the Mortgage Brokerage and Mortgage Lending Acts of the Florida Statutes.
Seller of Travel Bonds
The Florida Department of Agriculture and Consumer Services requires travel agents to get a surety bond before they can receive a travel agent license. The required bond amount depends on the nature of the agent’s business.
Travel agents that offer vacation certificates must get a $50,000 surety bond. Those that do not only need to post a $25,000 bond.
By posting the bond, travel agents agree to conduct business according to the provisions listed in Sections 559.926 through 559.939 of the Florida Statutes, also known as the Florida Sellers of Travel Act.
Hunting and Fishing License Agent Bonds
The Florida Wildlife Commission requires individuals who sell hunting and fishing licenses to post a $1,000 surety bond. The bonds are put in place to ensure that principals accurately report all licenses and permits entrusted to them along with the receipts and proceeds collected on the job.
Health Studio Bonds
Health studios that use a third party to collect fees more than 30 days before they are due are required by the Florida Department of Agriculture and Consumer Services to post a $25,000 surety bond.
By posting a Florida health studio bond, the health studio pledges to abide by all regulations stated in section 501.012 through 501.019 of the Florida Statutes, also known as the Florida Health Studio Act. Specifically, the bonds ensure that the club provides all services as agreed and reimburses members for any services not provided.
For more information on getting different licenses and bonds in Florida, you can check out more of or guides:
How to Get a Mortgage Broker License in Florida
How to Get a Florida Public Adjuster License
How to Get a Florida Debt Collection License
How to Get a Florida Telemarketing License
How to Get a Florida Alcohol License
How to Get a Florida Contractor License
Florida surety bonds frequently asked questions
Most surety bonds in Florida are issued for a set term. This will vary depending on bond, but typical bond terms are 1, 2, and 3 year periods.
Others bonds are issued as continuous bonds. These bonds remain in force until canceled by the bonding company.
Obtaining a surety bond is usually a pain-free process. Many applicants can be approved instantly and have their bond dispatched within a few days.
EZ Surety Bonds offers a simple and user-friendly application form that you can complete in minutes. All that is needed is some basic personal and business information.
In most cases, collateral is not required to get a surety bond. There are certain circumstances where the surety may offer to accept collateral for a more risky principal.
Get bonded with EZ Surety Bonds
EZ Surety Bonds makes it easy to apply for a surety bond in Florida. You can get a free quote online today. It takes a few minutes to apply for most surety bond categories. Plus, we work with individuals with all kinds of credit.