How do you get a CO surety bond?
Surety bonds in Colorado 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 in Colorado 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.
Who needs a surety bond in Colorado?
The State of Colorado requires 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 part of the process for obtaining a license or permit. They are required by the state of Colorado and other municipal entities to ensure businesses comply with regulations in place to protect the general public. Some of the most common bond types include:
- Motor Vehicle Dealer Bonds: The Colorado Department of Revenue Motor Vehicle Dealer Board requires a surety bond to sell new and used motor vehicles in the state.
- Contractor License Bonds: Local entities like the County Of Denver Department Of Public Works require certain types of contractors to post a surety bond to provide assurance they will comply with laws relating to their field.
- Manufactured Housing Bonds: The Division of Housing of The State of Colorado requires surety bonds to ensure that housing retail dealers, manufacturers and contractors comply with state laws and regulations.
- Mortgage Broker Bonds: The State of Colorado Division of Real Estate requires Mortgage Broker Bonds to guarantee industry standards and regulatory compliance.
- Freight Broker Bonds: These bonds are required by the Federal Motor Carrier Safety Administration (FMCSA) to legally operate as a transportation broker.
- Certificate of Title Bonds: These surety bonds help new vehicle owners obtain a certificate of title to prove vehicle ownership to the Colorado Department of Revenue Division of Motor Vehicles.
- Hunting And Fishing License Bonds: The State of Colorado requires guides on hunting or fishing trips to post a surety bond as part of the licensing process.
How much does a surety bond cost in Colorado?
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 tend to range between 1% and 15%. When determining your premium rate, the surety company evaluates your credit history, financial statements, industry experience, and licensing history. The better your financial standing, the better rate you will receive. Bad credit can result in higher premiums and make it harder to secure certain bonds.
Below are the costs for some of the more popular surety bonds in the state of Colorado.
- Mortgage Loan Broker Special Deposit Bonds: Mortgage loan originators are required by the Colorado Department of Regulatory Agencies to post a surety bond of $100,000. EZ Surety can offer premiums for these bonds as low as $750.
- Contract License Bonds: Various cities in the State of Colorado require contractors to post a surety bond to guarantee performance. The total amount for these bonds will vary depending on the county. EZ Surety can issue these bonds for a premium as low as $100, subject to underwriting.
- Public Adjuster Bonds: The Colorado Department of Regulatory Agencies’ Division of Insurance requires public adjusters to post a $20,000 surety bond. EZ Surety can issue these bonds for a premium as low as $200.