How do you get an OH surety bond?
Surety bonds in Ohio 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 Ohio 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 Ohio?
The State of Ohio requires surety bonds for various 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 they are also 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 Ohio and other municipal entities to ensure businesses comply with all necessary regulations. Some common license and permit surety bond types include:
- Motor Vehicle Dealer Bonds: The Ohio Bureau Of Motor Vehicles requires a surety bond for dealers who sell new and used motor vehicles in the state.
- Contractor License Bonds: The City of Columbus and other municipalities require certain types of contractors to post a surety bond to provide assurance they will comply with laws relating to their field.
- Notary Bonds: The State Of Ohio requires surety bonds to ensure notary publics perform their function as an unbiased and impartial witness.
- Mortgage Broker Bonds: The State Of Ohio Division Of Financial Institutions requires surety bonds to guarantee brokers meet industry standards and regulatory compliance.
- Public Insurance Adjuster Bonds: The Ohio Department of Insurance requires public adjusters to post a surety bond as part of the licensing process.
- Utility Bonds: These bonds provide financial assurance to companies like American Electric Power that a customer will pay for their utility usage on time.
- Manufactured Housing Bonds: The Ohio Manufactured Homes Commission requires surety bonds to ensure that housing retail dealers, manufacturers and contractors comply with state laws and regulations.
How much does a surety bond cost in Ohio?
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 Ohio.
- Contractor License Bond: Various cities in the State of Ohio 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.
- Ohio Surplus Lines Broker Bond: The Ohio Department of Insurance requires a $25,000 surety bond as part of the licensing process for those trying to become a Surplus Lines broker. EZ Surety can issue these bonds for a premium as low as $250.
- BMC-84 Freight Broker Bond: Freight brokers and freight forwarders are required by the Federal Motor Carrier Safety Administration (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.