California Surety Bonds

California Surety Bonds

How do you get a surety bond in California?

Surety bonds are legally binding agreements that ensure obligations are met. There are three parties involved in the contract:

  • The principal: The party that must fulfill the obligation.
  • The obligee: The party that needs a guarantee the principal will perform.
  • The surety: The party that issues the bond to guarantee the performance of the principal. If the principal fails to meet the agreed obligations, the surety will pay out claimed losses up to the bond amount with the principal ultimately liable for those losses. 

The process begins when the obligee informs you or your business a surety bond is required. You must then research the type of bond that you need and its specific requirements. From there, you will apply online for the bond through a surety company or agency.

The surety company will require you to provide personal and business information such as names, addresses, social security numbers, and employee identification numbers. Their underwriters will use this information to review your financial health to assess the risk of issuing you the bond.

After your application is approved, you will receive a surety bond quote with the bond premium (which is another name for the price of the bond and which varies depending on the amount of bond coverage you applied for). If you accept the quote, you pay the premium and the surety company issues you the bond.

Is a surety bond required in California?

California requires many different surety bonds across a variety of industries. There are two primary categories for these bonds; contract bonds and commercial bonds.

Contract Surety Bonds help project owners ensure that contractors perform their work properly. There are different types of contract bonds, including performance bonds which protect the project owner from financial loss if the contractor fails to perform in accordance with the agreement.

Contract Surety Bonds are most common in the construction industry but can also be used for janitorial services, transportation, and security services.

Commercial Bonds are often related to a specific license or permit and are required by the state of California and other municipal entities to ensure businesses conform to all regulations and codes needed to protect the general public. Some of the most common bond types include:

How much does a surety bond cost in California?

Surety bond costs vary depending on the bond amount and the premium rate. The obligee sets the required bond amount and the surety determines your premium rate, which is the percentage of the total bond amount you pay as the premium.

Premium rates for surety bonds in California tend to range between 1% and 15%. When determining the rate of the premium, the surety evaluates your credit history, financial statements, industry experience, and licensing history. The better your financial standing, the better rate you will receive. Bad credit won't necessarily prevent you from obtaining a bond in California but it can result in higher premiums.

Below are the costs for some of the more popular surety bonds in the state of California.

  • California Motor Vehicle Dealer Bond: Auto dealers selling new motor vehicles are required by the California Department of Motor Vehicles to post a surety bond of $50,000. EZ Surety Bonds can issue these bonds for a premium as low as $500, issued instantly.
  • Contract License Bond: The CSLB requires contractors in California to post a $15,000 surety bond. EZ Surety can issue these bonds for a premium as low as $349. Contract License Bonds are subject to underwriting meaning your personal credit history will determine the total price.
  • BMC-84 Freight Broker Bond: Freight brokers and freight forwarders are required by the FMCSA to post a $75,000 surety bond to receive a freight broker license. EZ Surety can issue these bonds for a premium as low as $938, subject to underwriter review.

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