Surety Bonds

No — although surety bonds are usually issued by insurance companies and regulated under state insurance law, they work fundamentally differently from insurance. Insurance transfers risk from the policyholder to the carrier; when a covered loss occurs, the carrier absorbs the cost. A surety bond is a financial guarantee in which the surety company pays the obligee (the party protected by the bond) and then pursues the principal (the bonded business) for reimbursement under an indemnity agreement. In other words, you are ultimately responsible for any claim paid out under your bond. That’s why surety underwriting feels more like commercial credit than insurance underwriting — credit, financial strength, and character all matter.

Premium varies by bond type, bond amount, and the principal’s credit and financial profile. Standard-credit pricing typically runs 1%–3% of the bond amount annually for most license, permit, and small contract bonds. Credit-challenged principals access specialty markets at higher rates, typically 3%–10% or more. For larger contract bonds (performance and payment over $1M), pricing benefits from established working capital and financial-statement quality — strong contractors can sometimes secure rates under 1%. Smaller bonds often have minimum premiums regardless of bond amount ($100–$250 is common). We pre-qualify principals across multiple sureties to find the best available rate.

The Maryland Home Improvement Commission (MHIC) bond is a $20,000 surety bond required for businesses licensed by MHIC to perform home improvement work in Maryland (most residential renovation, remodeling, repair, and addition work). The bond protects Maryland homeowners harmed by contractor misconduct — incomplete work, code violations, deposit theft, or other actionable behavior. Premium typically runs $100–$500/year for standard credit. The bond is renewable annually and is verified by MHIC at license renewal. Without it, you can’t be licensed as a home improvement contractor in Maryland. We write MHIC bonds same-day for qualifying applicants.

Federal construction prime contracts over $150,000 require both performance bonds and payment bonds under the Miller Act, each typically at 100% of contract value. Many federal solicitations also require a bid bond at 20% of bid amount (capped at $3M) as a condition of bid submission. Federal bonds must be issued by sureties listed in Treasury Department Circular 570 (“T-listed sureties”) — and the contracting officer will verify this. For state and local public works projects, “Little Miller Acts” in Maryland, DC, and Virginia impose similar requirements at thresholds set by each jurisdiction. We have relationships with multiple T-listed sureties and can advise on capacity and submission packaging.

Yes — although standard-credit principals get the best rates, specialty surety markets exist specifically for credit-challenged, newer, or higher-risk principals. Premium is higher (often 3%–10%+ of bond amount), and sureties may require additional collateral (cash, letter of credit, or third-party indemnity) for larger bonds. Many small license and permit bonds (MHIC, motor vehicle dealer, notary, freight broker) can be written even with significant credit issues — bonds with smaller penalty amounts and lower individual claim severity have broader underwriting appetite. Larger contract bonds (performance and payment) tighten more on credit but specialty programs still exist. We pre-qualify across the full market range.

Yes — for contractors looking to grow their bonded work volume, bonding capacity is a function of working capital, net worth, financial-statement quality, and prior bonding history. We work with contractors and their CPAs to: (1) present financials to sureties in the format they expect, (2) establish an initial open bonding line with single-project and aggregate capacities, (3) structure work-in-progress reporting that supports capacity increases, and (4) coordinate with the contractor’s banking relationship since capacity at the larger sureties often depends on the bank’s view of liquidity. Most contractors can grow from a $250K single-project / $1M aggregate starting line to multi-million single-project capacity within 2–3 strong years with the right financial-statement discipline.