Surety bonds for security guard companies
Fewer states require a surety bond than you think. What a bond guarantees, which states ask for one, what the premium depends on, and how to stay bonded.
Ask three owners what surety bond their state requires and you get three answers, two about a different license class. The bigger surprise is how many states ask for no bond at all. They want liability insurance instead, and the two are different instruments.
Check your own regulator first. New York requires a $10,000 surety bond for a watch, guard or patrol agency. California, Florida and Arizona require none, asking for general liability insurance instead. Where a bond is required you pay an annual premium, then repay the surety for anything it pays out.
Every figure below is linked to the regulator or statute it came from, and all of them move. Read the current requirement off the agency page before you file. A bond broker quoting you off a national chart is not a substitute for that.
What is a surety bond, and who does it protect?
Not you. That is the part owners get wrong.
A bond is a three-party agreement, and you are only one of the three.
- Principal
- Your company. You make the promises about how you will operate.
- Obligee
- The state licensing authority, and through it the public. This is the protected party.
- Surety
- The bonding company. It backs your promises with its own balance sheet, and it expects to be paid back.
What the bond guarantees is set by the statute that requires it, but the commitments usually cover:
- Operating within the regulations that govern licensed companies
- Keeping the company license and every guard registration current
- Running the business without fraud or harm to clients
- Paying the fees and administrative penalties you owe the state
Some states extend the bond to theft or misconduct by individual officers. New York's is written in favor of the state and any person injured by the licensee's acts, which is why the Department of State approves the bond's form and execution before the license issues.
The claim process is short and it does not go your way by default.
- Someone harmed by a violation files a claim against your bond.
- The surety investigates and decides whether the claim is valid.
- If it is valid, the surety pays the claimant up to the face amount.
- You repay the surety in full, plus its costs.
A bond is a guarantee to others, not coverage for you. If a claim is paid, you owe that money back. Fail to repay and the surety comes after the business and, because you signed a personal indemnity, after you. Liability insurance is the instrument that absorbs a loss. A bond is the instrument that fronts one.
Which states actually require a bond?
Fewer than the bond brokers' landing pages suggest. Four states, checked against their own regulator or statute:
| State | Surety bond for a guard company | Liability insurance required |
|---|---|---|
| New York | $10,000, approved by the Department of State before the license issues | $100,000 per occurrence, $300,000 aggregate, when employing guards |
| California | None published for a Private Patrol Operator license | $1,000,000 per occurrence |
| Florida | None in the Class B agency insurance statute | $300,000 combined single limit |
| Arizona | Not required of a security guard agency; the $2,500 four-year bond applies to private investigator agencies | $100,000 per occurrence, $300,000 aggregate |
Sources, in order: the New York Department of State watch, guard or patrol agency page, the BSIS private patrol operator insurance requirement under Business and Professions Code 7583.39 and 7583.40, Florida Statutes section 493.6110, and Arizona DPS SGPI licensing.
Texas takes a different shape again. The DPS Private Security program publishes the current bond and insurance conditions in its statutes and rules, and the figures are not reproduced here because DPS revises them. Read them there, then price the bond.
Two practical consequences. First, a broker who sells you a bond your state does not require has sold you nothing your regulator wants. Second, the states that skip the bond usually want a larger insurance limit instead, which is a bigger annual line item. General liability for security companies covers what that policy has to contain, and the full insurance picture covers what else sits alongside it.
Within a single state the requirement can also split by license class. Armed and unarmed services, patrol versus standing post, each branch office, and in some states the individual armed officer, may each carry a separate instrument. Read your own class, not the summary.
What does a bond cost?
You do not pay the face amount. You pay an annual premium that is a percentage of it, and the percentage is priced almost entirely off the owners' personal credit.
Strong personal credit puts a small license bond in the low single digits as a percentage. Weak credit multiplies that several times over, and below a certain point the surety will ask for collateral or decline. Published percentage charts are marketing. Get three real quotes and price from those.
The arithmetic is worth doing out loud. On a $50,000 bond, a 4 percent quote is $2,000 a year. A 12 percent quote on the same bond is $6,000. That $4,000 gap is the annual cost of a credit score, which is a reason to fix the score before you file rather than after.
A bond application asks for:
- Personal credit checks on every owner and principal
- Business and personal financial statements
- The business license application you are bonding
- Resumes showing the principals' industry experience
Underwriting turns on a short list. Personal credit drives the price. Financial strength says you could repay a claim. Industry experience says you know the work. A prior claim or a cancelled bond stops the file, and a principal's criminal history can too.
If you are still at the stage of assembling the license file, starting a guard company sequences the bond, the insurance and the license application in the order the states actually want them.
How do you keep the bond in force?
Most bonds renew annually and lapse the moment you miss the payment. A lapsed bond can suspend the license, which suspends the contracts, which is a bad week. Put the renewal date in the same calendar you use for license and guard registration expiry.
Premiums move at renewal, either because a claim was filed or because your credit changed. Neither is a surprise if you are watching both.
Avoiding claims is mostly ordinary operating discipline:
If a claim lands anyway, respond the day it arrives. Send the surety everything it asks for, and dispute an invalid claim with documents rather than argument. If it is paid, arrange repayment rather than waiting to be chased. How you handle one claim sets your rate and your availability for the next bond you need.
Where do you buy one?
Four routes, and they do not price the same.
- Your existing insurance agent. Convenient if they already write your general liability, and they know your file.
- A specialty surety broker. Bonds only, and access to markets a generalist does not have.
- Online bond providers. Fast quotes, thin service when something goes wrong.
- Association programs. Group arrangements through an industry body, sometimes at better rates for members.
Get quotes from at least three. Compare the terms and the cancellation notice, not only the premium, and check that the surety is one your state will accept. New York, for one, requires the bond be written by a company approved by the state and approved by the Department of State as to form and sufficiency.
For a wider solvency check, the Treasury publishes Circular 570, a list of companies certified to write or reinsure federal bonds. It governs federal work rather than state license bonds, but a surety that is not on it is worth a second look.
If your state is one of the ones with no bond at all, the same effort goes into the insurance certificate instead, and the licensing rules for your state are the place to start: New York, California and Texas each run their own system.
Key Takeaways
- Check whether your state requires a bond at all. California, Florida and Arizona want insurance.
- New York's is $10,000, approved by the Department of State before the license issues.
- You pay an annual premium, not the face value, priced off the owners' personal credit.
- A paid claim is repaid by you. A bond is not insurance.
- A lapsed bond suspends the license. Track the renewal with your license dates.
Continue Reading
New York guard license: registration and training
What a New York guard license takes: 8 hours pre-assignment, 16 on the job, 8 in-service a year, the armed track, and what the employer has to file.
Florida guard license requirements: Class D and Class G
What Chapter 493 requires for a Class D and a Class G: the 40 and 28 training hours, the disqualifiers, and the annual firearms requalification.
Verifying a Texas guard license as an employer
Check every officer against the free TOPS search rather than the card, track the two renewal clocks separately, and report status changes to DPS on time.