Enter bond and pricing inputs
Formula used
This calculator estimates a payment bond amount and the related premium cost using common surety pricing components.
- Adjusted Contract Value = Contract Value + Change Orders
- Bond Amount = Adjusted Contract Value × (Coverage% ÷ 100)
- Raw Premium = Bond Amount × (Rate% ÷ 100)
- Base Premium = max(Raw Premium, Minimum Premium)
- Tax Amount = (Base Premium + Underwriting Fee) × (Tax% ÷ 100)
- Estimated Total Cost = Base Premium + Underwriting Fee + Tax Amount
- Cost per Month = Estimated Total Cost ÷ Term Months
How to use this calculator
- Enter your contract value and include any approved change orders.
- Set coverage percent to match owner or statutory requirements.
- Enter the surety’s premium rate and any minimum premium floor.
- Add underwriting fees and applicable taxes if they apply.
- Choose the expected term in months to view a monthly cost.
- Click Calculate to see the results above, then export if needed.
Example data table
| Scenario | Contract Value | Change Orders | Coverage | Rate | Minimum | Fee | Tax | Estimated Total |
|---|---|---|---|---|---|---|---|---|
| A | $2,500,000 | $0 | 100% | 1.75% | $500 | $150 | 0% | $43,900.00 |
| B | $1,200,000 | $60,000 | 100% | 2.10% | $750 | $150 | 1.5% | $26,593.50 |
| C | $450,000 | -$25,000 | 90% | 3.00% | $500 | $100 | 0% | $11,575.00 |
Example totals assume tax is applied to premium plus fee.
Professional guide to payment bond estimating
1) What a payment bond protects
Payment bonds are designed to protect subcontractors, suppliers, and laborers if a contractor fails to pay. On many public projects, bonding is required to reduce lien risk and keep work moving. This calculator helps you model bond cost impacts early, before award and procurement decisions lock in.
2) Typical coverage levels and bond amount
Coverage is often set at 100% of the adjusted contract value, but owners may request different levels depending on jurisdiction and contract language. The bond amount here is computed from adjusted value and coverage percent, so you can test scenarios such as 90%, 100%, or 110% coverage when change orders are expected.
3) Premium rates and practical ranges
Surety premium rates vary by contractor financial strength, experience, project type, and backlog. Many small to mid-sized contracts may see rates in the 1% to 3% range, while higher-risk profiles can price above that. Use the rate input to reflect quotes, then compare the resulting premium against bid margins.
4) Minimum premium and why it matters
For smaller bonds, the raw premium from a percentage rate can fall below a carrier’s minimum. Minimum premiums ensure underwriting costs are covered regardless of bond size. If your calculated premium seems unusually low, adding a realistic minimum can align the estimate with common market practice and avoid budget surprises.
5) Fees, taxes, and total cost visibility
Some bonds include fixed underwriting or processing fees, and certain regions apply premium taxes or stamping fees. This calculator applies tax to premium plus underwriting fee to produce a transparent total. If your quote separates taxes, you can mirror that structure by setting the tax percent accordingly.
6) Change orders and bond cost drift
Even modest change orders can materially increase bond amount and cost on large contracts. By entering anticipated net change orders, you can estimate how bond cost drifts over time. This is useful for contingency planning, especially when scope growth is common in renovation or fast-track delivery.
7) Term and cost-per-month budgeting
While payment bonds are commonly priced as a one-time premium, project teams often budget costs monthly. The term input converts total cost into a cost-per-month figure to support cashflow planning. For longer durations, consider whether your surety charges renewal or continuation premiums and model them separately.
8) Interpreting results for bids and compliance
Use the summary to validate that bond amount meets owner requirements and that pricing assumptions are defensible. Exporting results helps document your estimate trail for internal review. Final pricing depends on underwriting and contract terms, so treat outputs as planning figures, not binding quotations.
FAQs
1) Is a payment bond the same as a performance bond?
No. A payment bond focuses on paying subs, suppliers, and labor. A performance bond focuses on completing the contracted work if the contractor defaults. Many projects require both.
2) What value should I use for coverage percent?
Use the owner’s requirement first. If none is stated, 100% of adjusted contract value is a common benchmark. Some contracts use higher coverage when change orders or subcontract exposure is high.
3) Where do premium rates come from?
Rates are set by the surety based on contractor financials, credit, experience, project type, and workload. Ask your broker or surety for a quote, then enter that rate to validate your budget and bid assumptions.
4) Why does minimum premium change my estimate?
Because small bonds can produce a percentage premium that is below underwriting costs. The minimum premium is a floor that ensures the calculated premium does not fall below a realistic minimum set by the carrier.
5) Should taxes apply to premium only or premium plus fees?
It depends on local rules and the quote structure. This calculator applies tax to premium plus underwriting fee for a conservative estimate. If your quote taxes premium only, set the underwriting fee to zero.
6) How should I treat change orders?
Enter the net expected change orders as a single number. Positive values increase bond amount and cost; negative values reduce them. For uncertain scope, run multiple scenarios to bracket likely outcomes.
7) Can I rely on the exported CSV or PDF for approval?
Use exports to document calculations and compare scenarios. Approvals typically require a surety quote and contract review. Treat exports as supporting evidence, not a substitute for underwriting documents.
Plan bonds confidently, reduce surprises, and protect cashflow always.