How Much Does a Surety Bond Cost?

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A surety bond is used so that an insurance company can guarantee an initial judgment, and collateral is used to back up that bond on a case-by-case basis. Learn about the tax implications involved in using surety bonds with help from a personal asset manager in this free video on the bond market and money management.

Part of the Video Series: Bond Market
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Video Transcript

Hello, I'm Roger Groh. May this never happen to you. But if you've been dragged into court and because somebody has sued you and the court has found that you owe money to somebody else, they're going to be very concerned about getting payment. Especially if you intend to appeal that decision onto another court where it might be a year or two or three or more before there is any decision on the appeal process. In order to be sure that the initial judgment is funded, in other words that that person can get paid depending upon the appeal, a business has sprung up where insurance companies actually guarantee the initial judgment. Those are called surety bonds and it's where you go and buy from an insurance company a bond saying that they will pay the judgment that was rendered against you. Now why would they do that? Well because you have given them collateral to backup that bond or cash to backup that bond and as a result, they feel comfortable doing that and they will charge you a large rate of interest to make that happen. There are some tax implications in using them that may be beneficial for you, you should consider it and speak with your tax professional before using a surety bond or paying cash to satisfy any judgment. I'm Roger Groh and thank you for spending a few minutes with me.

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