What is a bank surety bond and how much does it cost?

What is a surety bond?

The first time you hear this term you may feel a little lost, since it is not in common use and can give rise to a general sense of reluctance.
That is why today we will explain what a bank surety bond is, who can request it and, above all, what its costs are.

The term surety bond refers to a specific guarantee issued by a guarantor or surety on behalf of another party who thereby becomes the contracting party, in this way securing an obligation – which consists of a payment – on the part of the party who benefits from the surety bond.

What does it mean in plain terms?

It means that the surety becomes the “guarantor” and will pay, with their own money, a debt that the contracting party may incur.

Therefore, a bank surety bond means a guarantee agreement issued to a contracting party by a banking credit institution.
So a party goes to the bank and requests the bank surety bond; in doing so they undertake to pay a set amount each month so that the bank guarantees to a third party the recovery of the money spent, in the event of default by the party who requested the surety bond.

To be able to request the surety bond you will need to go to a credit institution – subject to its timeframes and procedures – or rely on a specialised agency. We at Italia Fideiussioni are here precisely to enable you to request the surety bond best suited to whatever your need may be.

When is it appropriate to request a surety bond?

There are many cases in which it is necessary – if not mandatory – to request a bank or insurance surety bond, while in other cases it is a matter of judgement – such as when a surety bond is requested in order to rent accommodation under a lease.
Below we briefly look at some cases in which a surety bond is requested:

Study visa for non-Schengen students

In order to obtain a visa for students from outside the Schengen area who wish to study in Italy, there are guidelines that must be followed scrupulously.
The importance of this visa lies in its duration – different from that of a tourist visa, which is 90 days – and different from a work visa – valid up to the duration of the employment contract – the latter being a visa that can be extended and renewed as long as the studies continue, and which therefore requires additional checks.
To be able to study in Italy you will therefore need to apply for an Entry Visa at the Embassy or Consulate of the country of origin located in Italy.
Among the documents to present and have are:

• The visa application form
• A valid passport
• Flight ticket booking
• A recent passport-format photo
• A certificate of where you will reside in Italy
• The certificate of payment of the school tuition fee
• Bank surety bond certifying the ability to support yourself for the entire stay in Italy
• Certification of financial means for repatriation
• International Health Insurance valid in Italy

Purchase of a property received as a gift

Another case in which a surety bond is strongly recommended – but in which it is not mandatory, as it is for the non-Schengen student visa – is when you are considering the purchase of a property received as a gift.

Since this transaction is rather risky for the buyer, a bank surety bond is recommended, this being the case when you wish to purchase a property that has been gifted and which, moreover, is still within the years during which the forced heirs may make a claim against it.
In this case you will ask the donor themselves – if living – or the forced heirs to take out a surety bond in favour of the third party who will purchase the property.

This will protect the buyer from the possibility that the forced heirs claim the property back and – should this happen – will protect the buyer’s pocket, as they will be refunded what they spent on the property paid for but not obtained.

Construction site works – provisional and definitive guarantee and CAR and ten-year latent defects policies

When it comes to construction sites – especially for works for the public administration, public contracts – it is absolutely mandatory and necessary to be able to provide guarantees.
The surety bond makes it possible to guarantee compensation in the event of damage, as well as the successful completion of the works within a given time limit.
In this article we have explained in detail what the provisional and definitive guarantees are and how to request them; while in this other article we addressed the topic of insurance policies.

Indeed, these are able to protect not only the contractor but also the client and – as can also be read in Article 13 of the Public Contracts Code – are mandatory for those carrying out the works, and in the case of the CAR policy it must be submitted a full ten days before the handover of the works, precisely to cover damage caused during the works.

Bank Surety Bond and residence permit

As with the visa for non-Schengen students, for any type of residence permit – for work, for family reunification, for awaiting employment, for medical treatment, for family reasons, for social protection, for minors, for volunteering, for scientific research, for victims of domestic violence and for many other cases… – it will be necessary to present both a health insurance policy and a bank or insurance surety bond.

Why?

In the case of a non-EU citizen, it is important that the person themselves can demonstrate to the host country – in this case Italy – that they have sufficient funds for their subsistence and, above all, for their maintenance during the stay in Italy, as well as being able to cover the healthcare expenses that Italy will provide in the event of hospitalisation. To find out more about the bank surety bond for foreigners, please refer to our specific articles on applying for a visa available on our website.

But these are not the only other cases in which a bank surety bond is required; it is mandatory when registering with the Register of Environmental Operators or also when you wish to register as a road haulier with the specific Register to demonstrate financial capacity. For these more specific cases, please refer to our articles, which you can find here and here.

Who can request a bank surety bond?

So, who can request a bank surety bond?
Essentially it can be requested by private individuals, by contractors and by companies; it depends on the case. Just as it will depend on the case whether it is required on a mandatory basis or as an option.

Let us return to the example of the rental: a landlord may request a bank surety bond as an additional guarantee on top of the deposit, but the latter is not mandatory; being a request, there may be negotiation between the parties or a failure to reach agreement, whereas in the case of registration with the Register of Environmental Operators, the absence of the bank surety bond will result in the automatic cancellation of the application.

In short, we come to the question we have been asking ourselves from the start, namely: how much does a bank surety bond cost?

How much does a bank surety bond cost?

Here we come to the “sore point”, so to speak. The bank surety bond can, for many, be entirely uncharted territory since it is normally requested only in specific cases, as you will be required to guarantee with your own capital from 100% to 120% of the amount requested.
Obviously this guarantee must be applied either by paying a set amount each month or by freezing your savings for the period envisaged.

We would point out that the guarantor is bound for the entire duration of the surety bond agreement, so once your savings are frozen there is no turning back until the end of the agreement. But how much does the bank surety bond cost in terms of money “spent”?

Usually – since we cannot speak of fixed costs – the commission to be paid to the bank for the surety bond is equal to 1% of the “frozen” amount, but this percentage may vary depending on the agreement and the rate applied, which is never fixed.
To get a clearer idea of the costs you will need to know the four variables: the amount of the sum, the type of bank, the type of guarantee and the applicant’s assets.

For this reason, we recommend that you always request a quote before entering into any agreement and that you rely only on professionals in the sector who can advise and guide you in the best possible way.

Conclusions

Italia Fideiussioni is an agency specialised in insurance, particularly in the field of surety bonds and guarantees. Experts in finding the best solution to your problem. With more than thirty years of experience, we are proud to be able to call ourselves experts in the surety bonds and guarantees sector. This allows us not only to produce this kind of informative article, but also to support the client through all the necessary procedures without delays or refusals.

Indeed, in a single year we have successfully handled, to the utmost satisfaction of the client, a full 97% of the requests received. We are so confident in our services that we allow the client to pay only if they manage to obtain the surety bond they requested. So, if you are here because you need a surety bond for any reason, contact us and request a free quote.

You will have the certainty of being supported with professionalism, courtesy and care for the client, and of obtaining what you requested! With Italia Fideiussioni you will always know which insurance agency is handling your case, and you will never have any “nasty surprises”.

Our company handles various types of surety bonds:

• Bank Surety Bond for Tourist Visa for Foreigners in Italy
• Bank Surety Bond for Study Visa
• Surety Bond for Family Reunification

• Health policy for Tourist Visa for foreign citizens in the Schengen Area
• Surety bonds for public contracts
• Surety bonds for non-repayable public grants AGEA, FILSE and other types
• Surety bonds for the construction sector, Law 210
• CAR site policy and CAR for public contracts
• Certification of financial capacity for road hauliers and vehicle inspection centres