A surety bond is a written guarantee, backed by a surety company, that you will meet a specific obligation — following the laws that come with a license, completing a construction contract, or complying with a court order. If you don't, the party the bond protects can make a claim and be paid. The surety then looks to you to repay it.
How a Surety Bond Works
Every surety bond involves three parties:
- The principal — you, the business or person who needs the bond
- The obligee — whoever requires the bond, such as the Contractors State License Board, the DMV, a court, or a project owner
- The surety — the company that issues the bond and guarantees your obligation
If the obligee or someone the bond protects suffers a loss because you didn't meet your obligation, they can file a claim on the bond. If the claim is valid, the surety pays it — and you are responsible for paying the surety back. That repayment promise, called an indemnity agreement, is part of every bond application.
Is a Surety Bond Insurance?
People often search for “surety bond insurance,” and there's a reason: in California, surety is legally a class of insurance. Insurance Code § 105 defines surety insurance as guaranteeing the behavior of persons and the performance of contracts, including bonds and undertakings required by law. That is why surety bonds are sold by insurance companies and through licensed insurance agents.
But a surety bond works differently from the insurance you're used to:
The Key Difference
Ordinary insurance protects you, and a paid claim is the insurer's cost. A surety bond protects the party requiring it — and if the surety pays a claim, you must repay it. The bond is a guarantee of your performance, not a policy that absorbs your losses.
Common Types of Surety Bonds
License & Permit Bonds
Required to obtain or keep a business license. Examples include the contractor license bond, the DMV auto dealer bond, the tax preparer bond, the cannabis license bond, and the talent agency bond.
Contract & Construction Bonds
Required on public works and many private projects: the bid bond submitted with a bid, then the performance bond and payment bond once the job is awarded, plus subdivision bonds for developers.
Court Bonds
Required in legal proceedings, such as appeal, attachment, and injunction bonds in lawsuits and probate bonds for executors, guardians, and conservators.
See the full bond directory for every type we write.
How Much Does a Surety Bond Cost?
You don't pay the full bond amount. You pay a premium — a percentage of the bond amount, usually for a one-year term. The surety sets the rate based on:
- The bond type and amount — some license bonds carry low, standard rates, while contract and court bonds are underwritten individually
- Your credit — for most bonds, personal credit is a major factor
- Financial strength and experience — for larger bonds, sureties review financial statements and track record
Because rates vary between surety companies, the same bond can be priced differently depending on where it's placed. No one can give you an exact price without knowing the bond type and amount, and for most bonds, running an application.
Know Which Bond You Need?
Send us the bond type and amount — or the letter, order, or bid documents that require it — and we'll get you a quote. Request a free quote →
How to Get a Surety Bond in California
- Confirm exactly which bond you need. The agency, court, or project documents will state the bond type, the amount, and who the obligee is.
- Contact a licensed surety bond agency with those details.
- Complete the application. Simple bonds need basic information; larger bonds may require financial statements.
- Review your quote and pay the premium.
- Receive your bond, sign it, and file it with the obligee — some bonds are filed electronically on your behalf.
Surety Bond Company vs. Surety Bond Agency
A surety bond company is the insurer that issues and backs the bond. A surety bond agency is licensed to place bonds with those companies on your behalf. Advanced Surety & Insurance Agency is an agency (California License #0G21229): we place your bond with surety companies admitted in California and all 50 states, and because we work with more than one, your application isn't limited to a single company's rates or appetite.