Short answer
A license and permit bond is a surety bond a government agency requires before it issues a license. It guarantees that you will follow the laws governing the licensed activity and pays valid claims to the public if you do not. The state sets the bond amount, and you reimburse the surety for any claim it pays.
Regulators use a License and permit bond to protect the public without holding your cash. Instead of posting the full amount yourself, you pay a Premium to a surety company that stands behind your compliance up to the Bond amount. If a valid claim is paid, you repay the surety.
The amount is set by statute or the licensing agency, so it is not negotiable, but the premium you pay for the bond depends on Underwriting. Many licenses can also be satisfied with a cash deposit instead of a bond, which ties up far more capital.
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