Question 1

What is a surety bond?

Accepted Answer

A surety bond is a three-party guarantee where an IRDAI-licensed insurer backs a contractor's obligation to a project owner. It replaces a bank guarantee without locking up cash as collateral.

Question 2

How is a surety bond different from a bank guarantee?

Accepted Answer

A bank guarantee typically requires 50–100% cash collateral and weeks to issue. A surety bond requires little to no collateral, is underwritten on business strength, and is issued in days - freeing working capital.

Question 3

Who can accept a surety bond in India?

Accepted Answer

Government and private project owners can accept surety bonds, subject to the applicable procurement rules and contractual terms. For Central Government procurement, insurance surety bonds are recognised at par with bank guarantees under the General Financial Rules; always confirm the wording of the specific tender or contract.

Question 4

How long does it take to get a surety bond from Assurety?

Accepted Answer

First-time applicants typically receive bonds within 5–7 working days of submitting complete documentation. Repeat clients with an established track record and pre-approved limits can be issued in 24–48 hours.

Question 5

What documents are required to apply?

Accepted Answer

Typically your financial statements, the contract or tender copy, corporate CIBIL or credit details, and standard company KYC documents. Your relationship manager shares a precise checklist for your bond type.

Question 6

How much do surety bonds cost in India?

Accepted Answer

Premiums typically range from 0.5% to 3% of the bond value per year, with little or no cash collateral for rated entities. Pricing depends on your credit rating, bond type, tenure and project risk.

Question 7

Can partnership or proprietorship firms get surety bonds?

Accepted Answer

Yes. Private and public limited companies, partnership firms, proprietorships and LLPs are eligible. Corporate CIBIL details are mandatory so the insurer can assess credit discipline and repayment behaviour, and every application is subject to underwriting.

Metric	Surety Bond	Bank Guarantee
Cash collateral required	Nil for BBB & above rated entities	Upto 100% margin / collateral
Issuance time	5–7 days (24–48 hrs for repeat clients)	2–4 weeks
Annual cost	0.5–3% premium, little/no collateral	Bank charges + opportunity cost of collateral
Working capital impact	Low - minimal lock-in	High - funds locked
Underwriting	Credit rating & project assessment	Collateral-led
Recovery on claim	Right of subrogation from principal	Adjusted against collateral
Tenure	Up to 7 years	Typically 1 year, renewed
Acceptance	Government and private project owners, subject to contract terms	Widely accepted

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Surety bond vs. bank guarantee.

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