Liquor bond rates are generally quite affordable, and they often make up only a small percentage of a business’ overhead. Rates do vary, though, and there are a few factors that can influence how much your business will pay for one of these bonds. Here are some of the items that insurers might consider when setting rates for your business.
How Much Will My Business Need to Pay for a Liquor Bond?
The Amount of the Liquor Bond
How large a liquor bond your business needs will, of course, have a significant impact on the bond’s cost. Unfortunately, this isn’t a factor that businesses always have control over.
In many states, the minimum bond amount is set by state law. You probably won’t find bonds for less than this amount if your business is in a state with minimum requirements, and even if you could it likely wouldn’t help your business obtain a liquor license. If your state has any minimum requirements, you can normally expect to get a bond for at least this amount.
Some states don’t have such laws, which lets business owners select how large a bond their business purchases. If you’re in one of these states, determining the right amount can be challenging. An insurance agent who specializes in liquor bonds will have the expertise necessary to help you make a wise selection if your business is in this situation, though.
Your Personal Credit Score
In some states, insurance companies might consider your personal credit score when considering your business’ rates. Where allowed, it’s fairly common for both lenders and insurers to look at your personal finances because you may run your business finances similarly.
While the above is generally true, there are exceptions. Not all business owners who have low credit scores run businesses that have financial struggles, and not all insurance companies look at personal credit scores. If you have blemishes on your personal credit report but your business’ credit history is pristine, an independent insurance agent might be able to find an insurance company that will consider only your business’ credit.
Your Business Credit History
There’s an even higher likelihood of insurance companies looking at your business’ credit history. A strong credit history might save your business a little on its bond costs, while a poor history could result in substantially higher rates.
If your business’ credit history isn’t great, an independent insurance agent may also be able to help you find an insurer that offers bonds to businesses with poor credit. By shopping around, an independent agent will be able to show you what various insurance companies will offer your business and what they’ll charge.
Your Business’ Assets and Liquidity
In addition to your business’ past financial history, its current financial position may also impact how much insurers charge for a bond. The more assets and financial liquidity your business has, the better prepared for a potential claim it is. This could reduce an insurer's risk exposure and potentially lead to lower rates.
Your Industry Experience
Certain insurers may also take into account your personal experience in the industry. If you’ve previously worked at or run businesses that had liquor licenses, the experience might help your business get a slightly lower rate.
Compare Quotes with an Independent Agent
Working with an independent insurance agent who can compare bonds from multiple insurance companies is one of the best ways you can find an affordable liquor bond for your business. To speak with a licensed and independent agent who’s familiar with these bonds, contact the World Insurance Associates team.