What to Know About Commercial Surety Bonds

Beyond contract bonds like bid, performance and payment bonds lies the world of commercial surety, where agents have ample opportunities.

Aaron Bruggeman, vice president, and Allison Lemke, commercial surety manager at CCI Surety, an RPS company, provide an inside view on commercial surety bonds.

"Commercial surety touches far more industries than most people realize," explains Bruggeman. "There are thousands of bond types, and many of them are essential for businesses just to operate. Once agents understand where these bonds apply, they start recognizing opportunities within their own books."

Commercial surety is basically built around regulatory compliance. Unlike contract bonds, which are often one-time instruments tied to a specific project, commercial bonds are typically required by statutes, municipalities or regulatory bodies and must be maintained in order for a business to hold a license or continue operating. As a result, most commercial bonds renew annually, creating long-term client relationships and consistent revenue streams for agents.

License and Permit Bonds

Among the most common commercial bonds are license and permit bonds, which are required by state, county or city authorities before a business can legally operate. These bonds ensure that a business complies with laws, pays required fees and fulfills its obligations to the public.

"License and permit bonds are a necessity for many businesses," explains Lemke. "If a contractor, dealer, or service provider wants to work in a specific jurisdiction, the bond is often required just to obtain or maintain their license."

This category includes contractor license bonds, both state-mandated and those required at the city or county level. Bond amounts vary by local statutes and project expectations, but the purpose of the bond is to ensure the contractor adheres to regulatory standards and financial responsibilities.

Underwriting for these bonds is typically straightforward.

"For most license and permit bonds, we're really looking at an application and a soft credit check on the owner," Lemke says. "The risk is largely based on personal credit, and that determines both eligibility and pricing."

Transportation and Motor Vehicle Bonds

These bonds are essential for businesses involved in freight brokerage, vehicle sales and motor carrier operations. One example is the BMC-84 bond, which is required for freight brokers who arrange the transportation of goods.

"If a broker is going to move freight, they're required by federal law to carry this bond," Lemke notes. "We see a significant volume of these, especially through RPS transportation teams."

Another major segment is garage or motor vehicle dealer bonds, which are required for any business selling new or used vehicles, including cars, motorcycles, trailers, boats and specialty equipment.

"Nearly every state requires a motor vehicle dealer bond," Lemke says. "Without it, the business cannot be licensed to sell."

Bond amounts in this space are dictated by state statute rather than the size of the operation, and underwriting focuses on the owner's credit to determine whether they qualify for standard or non-standard terms. The rate is then built from there.

Healthcare Bonds

Healthcare is another area of commercial surety and includes providers that interact with Medicare and Medicaid or operate under state licensure. These bonds are designed to ensure compliance with regulatory requirements and the proper handling of public funds.

Examples include DMEPOS bonds for durable medical equipment providers, home healthcare agency bonds and bonds required for participation in Medicaid or Medicare.

"If a pharmacy, medical supplier or home healthcare agency seeks government funds, they're often required to carry a bond," Lemke explains. "The bond guarantees they'll pay required fees, taxes and licensing dues — and if they don't, a claim can be made."

Because these bonds are tied to licensure and ongoing operations, they are typically renewable.

"That's one of the major differences from contract surety," Bruggeman says. "Most commercial bonds renew annually or biannually. It creates a stable, long-term book rather than a one-time transaction."

How a Risk Is Evaluated

With most bond types, risk is evaluated based on the business owner's credit profile rather than on full financial statements or operational metrics.

"We're not typically reviewing balance sheets for these bonds," Lemke says. "It's primarily a credit-based decision. The bond limits are set by statute, so our role is to determine whether the applicant qualifies for standard or non-standard terms."

Contractor surety is evaluated based on the "three Cs" — character, capacity and capital — to determine whether a contractor can handle a project.

"Financial strength, project experience and references really drive underwriting," Bruggeman notes. "Commercial surety, on the other hand, is much more streamlined, which makes it a great entry point for agents new to bonding."

How RPS Helps Agents Navigate the Surety Process and Placement

For many insurance agents, surety bonds are not an everyday request. A client may simply call and say, "I need a bond," leaving the agent to quickly determine what type is required and how to secure it. That's where RPS can help, guiding agents through the process from identifying the bond to finding the right market.

The Importance of Collaboration

Instead of expecting agents to know the details, the RPS team helps them navigate the process step by step.

"Sometimes the agent wants to handle the conversation with the insured, and other times they ask us to work directly with the contractor while keeping them in the loop," explains Jeremy Crawford, president of CCI Surety, an RPS company.

This collaborative approach helps avoid confusion and ensures the bond is placed correctly. In some cases, especially when the agent is unfamiliar with the surety space, our working directly with the insured can streamline communication and reduce the risk of misunderstandings.

Importantly, the agent's role and compensation remain unchanged.

"Whether we work through the agent or communicate directly with the insured, the commission stays the same," Crawford notes.

Offering a Wide Range of Bonds

CCI Surety, an RPS company, partners with more than 15 leading surety markets, many of which offer exclusive, specialized programs. This breadth allows the team to place a wide range of commercial and specialty bonds, including:

• Mortgage (broker, lender, originator)
• Healthcare (DMEPOS, home healthcare, Medicaid provider, health clubs/spas)
• MVD
• Contractor license bonds (state-specific and city, county, village, etc.)
• Court (probate, judicial)
• Agriculture (farm labor, agriculture dealer, grain warehouse, livestock dealer)
• Transportation (BMC-84, customs, highway use)
• Wage and welfare

Never Say No to a Bond

One of Crawford's strongest messages to agents is simple: don't decline a bond request just because it appears difficult.

"If your usual sureties turn down a bond, send it our way. There's a good chance we can still find a way to get it done," he says.

Agents often have relationships with a handful of preferred surety markets. When those markets decline a bond request, it can be tempting to assume the risk is unplaceable.

But Crawford says many of those situations still have viable options. Because RPS works with a wide range of surety markets and handles bonds across multiple industries, the team can often structure solutions that agents might not initially consider.

With RPS, agents have a partner that expands their surety capabilities. Whether the need is straightforward or specialized, the team helps agents identify the right bond, navigate underwriting and access markets they may not have on their own. The result is a smoother process for clients and a stronger opportunity for agents to deepen relationships and grow their business.