What Is a Surety Bond?

The three parties

Source: RLI.

Bonds vs. insurance

Insurance covers unexpected events, such as a fire or theft, and the insurer generally absorbs the loss. A surety bond guarantees that a business will meet an obligation it took on; the surety prequalifies the business on credit, capability, and character, and expects the business to repay any claim it pays, according to RLI.

Common bond types

Sources: SBA and State Farm.

Fidelity bonds and crime insurance

A fidelity bond protects a business against loss from employee fraud or dishonesty; schedule bonds cover named employees or positions, and blanket bonds cover all employees. Commercial crime insurance is broader, and can cover employee theft, forgery, robbery, computer fraud, funds transfer fraud, and social engineering. Business services bonds protect clients from an employee’s dishonest acts, and ERISA bonds protect pension plan assets.

Federal projects: the Miller Act

On federal construction projects, the Miller Act, implemented through FAR 28.102-1, requires performance and payment bonds for contracts over $150,000; for contracts of $35,000 to $150,000, the contracting officer must require two or more alternative payment protections, such as a payment bond or an irrevocable letter of credit.

SBA surety bond guarantees

The SBA’s Surety Bond Guarantee program helps small contractors get bonded by guaranteeing bonds on contracts up to $9 million (non-federal) and $14 million (federal). Bid bond guarantees carry no fee, and performance and payment bond guarantees cost 0.6% of the contract price.

Treasury Circular 570

For federal bonds, the surety must be on Treasury Circular 570, the Bureau of the Fiscal Service’s annual list of approved sureties and their underwriting limits. The current list is the 2026 revision, effective August 1, 2026.

Applying for a bond online

Propeller Bonds, based in Philadelphia, describes itself as an insurtech managing general agent with an instant-issue surety bond platform. It reported more than 6,000 instant-issue bonds in 2022, white-labels its platform for insurance agencies, works with A-rated carriers, and announced a partnership with Skyward Specialty in April 2022 and a $6.4 million seed round in January 2023. Our bond portal in the partner section runs on Propeller.

Bonds and liability insurance work together

Commercial general liability (CGL) insurance covers claims that your business caused bodily injury or property damage to others (Coverage A), personal and advertising injury such as libel, slander, or copyright infringement (Coverage B), and no-fault medical payments for non-employees (Coverage C), according to the Insurance Information Institute. It pays defense costs and damages up to the policy limits.

CGL policies exclude workers’ compensation, employment practices, most pollution, and liquor liability, and professional liability may also be excluded. You can buy CGL on its own, in a business owner’s policy, or in a commercial package policy.

State contractor bond examples

The Arizona Registrar of Contractors requires license bonds that range from $2,500 to $100,000 depending on license type and volume, such as $9,000 or $15,000 for residential general contractors; residential contractors also pay into a Residential Recovery Fund or post a $200,000 bond.

The Contractors State License Board requires a $25,000 contractor’s bond, workers’ compensation proof or an exemption (some classifications can’t claim one), and liability insurance for LLCs.

Washington contractor registration requires a $30,000 bond for general contractors ($15,000 for specialty) and $200,000 public liability plus $50,000 property damage, or $250,000 combined.

What affects the cost of a bond

Because a surety expects to be repaid, it underwrites the business much like a lender would. RLI describes the review as the three C’s: credit, capability, and character. Larger bond amounts, weaker credit, and limited experience generally mean higher prices or a request for financial statements or collateral, while small license bonds are often issued quickly.

How to get a bond

1. Find out exactly which bond the obligee requires, including the form, amount, and obligee name.
2. Gather business details, ownership information, and, for larger contract bonds, financial statements.
3. Apply through a surety, an agent, or an online bond portal.
4. Review the bond form and premium, then sign the indemnity agreement.
5. Deliver the signed bond to the obligee and track its expiration or renewal date.

Certificates of insurance

Clients, landlords, and general contractors often ask for a certificate of insurance (COI) showing your coverage and limits, and sometimes ask to be added as an additional insured. Many insurers issue COIs online; ERGO NEXT, for example, says it offers unlimited certificates at no extra cost. Check contract requirements before you buy so your limits match.

Liability limits contractors are asked for

General liability limits are usually stated as a per-occurrence limit, the most the policy pays for one claim, and an aggregate limit, the most it pays in a policy period. Contracts and licenses often set minimums: Georgia, for example, requires $300,000 or $500,000 per occurrence depending on the contractor license, and New Jersey home improvement contractors need at least $500,000 per occurrence. Higher limits cost more, and an umbrella policy can add limits above your general liability, auto, and employers’ liability coverage.

Checking a plan and insurer

• Contract requirements. Match limits and additional-insured wording to your contracts and licenses.
• Exclusions. Read what the policy doesn’t cover, such as professional services or autos.
• Workers’ comp rules. Confirm your state’s requirement for your headcount and industry.
• Insurer license. Check the insurer with your state insurance department.
• Certificates. Ask how quickly you can get COIs.

What an independent agency does

An independent insurance agency is licensed to sell policies from several insurance companies. Instead of quoting one company's products, an independent agent can compare options from the insurers the agency represents, explain the differences in coverage, and help you re-shop at renewal. The insurance company, not the agent, makes underwriting and claim decisions.

Blake Insurance Group is an independent agency. We work with clients by phone, email, and online in states where we are licensed, and we will tell you which insurers we can quote for your situation.

How we work

Blake Insurance Group serves clients by phone, email, and online in states where we are licensed. The insurers and plans we can offer depend on our appointments and your location; a company named on this page may not be available through us.

How to verify an insurer or agency

Before buying through any website or app, confirm who is selling you the policy and who will issue it:

1. Find the licensed agency or insurer named in the site's footer, terms, or license page.
2. Look up the agency or producer on your state insurance department's license search, or through the National Insurance Producer Registry (NIPR).
3. Look up the insurer on your state insurance department's company search to confirm it is authorized in your state.
4. Save the insurer's name and policy number once issued, since that is who handles claims.

A legitimate service will make this information easy to find. Be cautious if you cannot identify the licensed entity.

Sources

We checked the facts on this page against the sources below in October 2026. Plans, prices, and rules change, so confirm current terms before you buy.

• RLI: Surety bonds vs. insurance policies
• SBA: Surety bonds (Aug. 2026)
• State Farm: Surety and fidelity bonds
• Embroker: Fidelity bonds vs. crime insurance (May 2026)
• FAR 28.102-1: Miller Act bond requirements (June 2026)
• Bureau of the Fiscal Service: Treasury Circular 570 (Aug. 2026)
• Business Wire: Skyward Specialty and Propeller Bonds (Apr. 2022)
• IBS Intelligence: Propeller Bonds seed funding (Jan. 2023)
• Insurance Information Institute: Commercial general liability insurance
• Industrial Commission of Arizona: Compliance FAQ
• Arizona Registrar of Contractors: Bond information
• California DIR: Workers’ compensation FAQ
• CSLB: Issuing my license
• Washington L&I: Do I need a workers’ comp account?
• Washington L&I: Register as a contractor

What to have ready

These details help an agent quote accurately.

1. Business type and description. What you do and where.
2. Revenue and payroll. Used to price liability and workers’ comp.
3. Employees. Full-time, part-time, and contractors.
4. Locations and vehicles. Premises and any business autos.
5. Contract requirements. Limits and additional insureds required.

What is a surety bond FAQs

Related guides

• Commercial insurance
• Business liability insurance
• Small business insurance
• Workers’ compensation insurance
• General liability insurance

Partner quote options

Your next step

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