Texas Surety Bonds

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The State of Texas requires many different types of surety bonds for individuals and businesses across the state.

What is a Texas surety bond?

A surety bond is a three-party agreement between; the business or person required to get the bond (Principal), the company issuing the bond (the Surety), and the entity that requires the bond (the Obligee).

The purpose of a Texas surety bond is to protect different parties from damages resulting from the acts of the Principal. If the bondholder violates the terms of the bond, damaged parties can file a claim against the bond seeking financial compensation. If a claim is successful, the bonding company will pay the damaged party up to the total value of the bond.

Most common Texas surety bonds

There are a wide variety of surety bonds required in Texas. These bonds fall into three primary categories:

  • Contract Bonds: These bonds are needed for anyone that works on public construction projects
  • License Bonds: These bonds are required as part of the registration process for various professions
  • Court Bonds: These bonds are required for a variety of court proceedings

Some of the most common types of bonds in the State of Texas include:

Contractor License Bonds

Unlike other states, Texas does not have a state-level requirement for contractor license bonds. However, some cities and local jurisdictions have their own bonding requirements for contractors.

Some of the local jurisdictions that mandate contractor license and permit bonds include San Antonio, Lubbock, El Paso, and Wichita Falls.

Motor Vehicle Dealer Bonds

The Texas Department of Motor Vehicles requires surety bonds to ensure that car dealers and wholesalers conduct ethical business practices.

Below are some other types of Texas surety bonds:

  • Insurance Agency Bond
  • Mortgage Broker Bond
  • Notary Public Bond
  • Utility Deposit Bond

How much do Texas surety bonds cost?

The cost of a Texas surety bond depends on the total bond amount and your bond premium.

The required bond amount for Texas surety bonds is set by the obligee. It represents the maximum amount that the surety is willing to pay if someone were to make a successful claim against the bond.

Below are the required amounts for some popular Texas surety bonds:

  • Motor Vehicle Dealer Bond: $100,000
  • Contractor License Bond: Varies
  • Mortgage Broker Bond: $50,000
  • Notary Bond: $10,000

Your premium is the percentage of the required bond amount that you need to pay to get the bond. For example, a $50,000 bond with a 1% premium would cost $500 for you to obtain.

Premiums for surety bonds in Texas normally range between 1% and 15%. Some bonds are riskier than others, leading the surety company to charge higher premiums to cover against potential claims.

Depending on the bond, the surety company may review qualifications such as your financial history, credit score, and industry experience when underwriting the bond. Bad credit won’t prevent you from getting a bond, but you may need to pay a slightly higher premium.

Fill out an application below to get a free quote, typically within 24 hours. We shop around for the best rates for your financial situation. If you can’t find the bond you’re looking for, email apps@southcoastsurety.com or call 800-361-1720 for expert surety help!

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