When you see a bond amount of $1,000,000, it’s easy to assume you’ll have to pay that entire sum. In reality, the amount represents the coverage limit—the most the surety company would pay if a claim is filed. The actual cost to you is a small percentage of that amount, known as the bond premium.
A $1,000,000 surety bond is commonly required for large construction contracts, government licensing, or businesses managing significant public funds. The cost depends on your credit score, business financials, and the specific bond type.
What Is a $1,000,000 Surety Bond?
A surety bond is a three-party agreement among the principal (the party required to get the bond), the obligee (the entity requiring the bond), and the surety (the company issuing the bond).
The $1,000,000 amount—sometimes called the penal sum—is the maximum value the surety will pay if the principal fails to meet their obligations. It does not represent what the principal pays upfront.
In most cases, the principal pays only a small annual premium—usually a few percentage points of the bond amount—based on their financial profile.
What Does a $1,000,000 Surety Bond Cost?
The cost of a $1,000,000 surety bond typically ranges between 0.5% and 10% of the bond amount. That means most applicants can expect to pay between $5,000 and $100,000 per year.
Your exact premium is determined by a variety of underwriting factors, including your credit history, financial strength, and prior bonding experience.
Here’s what that typically looks like across different credit tiers:
- Excellent credit (700+): $5,000–$30,000
- Good credit (650–699): $30,000–$50,000
- Poor credit (below 600): $50,000–$100,000
For example, if your credit score is above 700 and your financials show consistent profitability, your surety rate could be close to 1%, meaning your annual premium would be around $10,000.
Factors That Affect the Cost of a $1,000,000 Surety Bond
Surety companies use risk-based pricing. That means the higher your financial stability, the lower your rate. The most influential factors include:
Credit Score
Your personal credit score has the biggest impact on bond pricing. Sureties see strong credit as a sign of financial responsibility, resulting in lower premiums. Applicants with weak credit can still qualify but will pay a higher percentage.
Financial Strength
Large bond amounts require the surety to evaluate personal and business financial statements. Companies with strong balance sheets, cash flow, and minimal debt are viewed as lower risk.
Industry and Bond Type
Different bonds carry different levels of risk. For example, a $1,000,000 performance bond for a construction project carries more financial exposure than a $1,000,000 license bond for a regulatory requirement.
Business Experience and History
A long track record of successful project completion and responsible financial management can lead to lower premiums.
Collateral or Indemnity Requirements
For especially high-risk applicants, the surety might require collateral (cash or a letter of credit) or additional indemnitors to back the bond.
Example Cost Scenarios
Here are three examples showing how the same $1,000,000 surety bond can cost very different amounts depending on your credit and financial profile.
If you’re an established contractor with excellent credit (typically 700 or higher), your surety rate might be around 1%, meaning your annual premium would be about $10,000.
A mid-size business with fair credit—in the 650 range—might pay closer to 3%, or around $30,000 per year.
For applicants with poor credit (below 600) or limited financial history, rates often rise to 8% or higher, which means a $1,000,000 bond could cost $80,000 or more annually.
These examples illustrate that your bond premium is just a small percentage of the total bond amount, not the full $1,000,000.
Common Uses for $1,000,000 Surety Bonds
A million-dollar bond amount is typically required when a project or business carries significant financial or legal exposure. Common examples include:
Performance and Payment Bonds
Used in large-scale construction projects to ensure contractors fulfill their obligations and pay subcontractors.
License and Permit Bonds
Required by certain state or federal agencies for high-value operations, such as mortgage brokers, auto dealers, or freight companies.
Court and Fiduciary Bonds
Used to protect estates, trusts, or court-appointed roles where large sums of money are being managed.
Business Service Bonds
Provide coverage for businesses offering professional or custodial services involving clients’ assets or property.
In each case, the $1,000,000 amount represents the maximum protection available to the obligee.
Can You Get a $1,000,000 Surety Bond with Bad Credit?
Yes, but you’ll likely pay a higher premium. Applicants with lower credit scores or limited financial history often pay closer to 5%–10% of the bond amount.
To offset risk, surety companies may request:
- Additional documentation (e.g., tax returns, financial statements)
- A personal or corporate indemnity agreement
- Partial collateral
Over time, improving your credit or building a positive bonding record can help you qualify for lower renewal rates.
Renewal and Duration
Most surety bonds are issued for one-year terms and must be renewed annually. Renewal pricing can fluctuate based on your credit and business performance.
For high-value bonds, the surety typically re-evaluates your financials before each renewal. Maintaining strong financial health and avoiding claims helps keep renewal rates low.
Key Takeaways
- You do not pay $1,000,000 for a $1,000,000 bond. You pay only a small percentage—typically 0.5%–10%.
- The average cost is between $5,000 and $100,000 per year.
- Credit, business financials, and bond type have the biggest influence on your rate.
- Bonds of this size often require extra documentation and sometimes collateral.
- Good financial habits and a strong bond history can lead to lower renewal costs over time.
