Hawaii Construction Bonds
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.
What Are Hawaii Construction Bonds?
Hawaii construction bonds help ensure that contractors working in the state operate lawfully and ethically. But in the event of contractor infractions, they also protect licensing authorities, project owners, and the public against financial losses by giving the injured parties the right to file a claim for monetary damages and be compensated for their loss.
What Hawaii Construction Bonds May Be Needed?
Some commonly required construction bonds in Hawaii are:
- Bid bonds
- Performance bonds
- Payment bonds
Construction bonds may be required by state and/or local contractor licensing bodies. They also may be required by public or private project owners, particularly for larger projects.
Other Hawaii construction bonds that project owners may require include:
- Contractor license bonds
- Maintenance bonds
- Subdivision improvement bonds
- Solar decommissioning bonds
- Right of Way bonds
How Do Hawaii Construction Bonds Work?
There are three parties to every Hawaii construction bond:
- The party requiring the bond is the “obligee,”
- The contractor required to purchase the bond is the “principal,” and
- The bond’s guarantor is the “surety.”
The principal is legally obligated to pay valid claims, but the surety agrees to extend credit to the principal, if necessary, to ensure timely payment to the claimant. So the surety will pay the claim initially, creating a debt that the principal must then repay to the surety or face legal collection proceedings.
How Much Do They Cost?
Multiplying the required bond amount established by the obligee and the premium rate set by the surety yields the bond’s annual premium cost. The primary factor in determining the premium rate is the principal's personal credit score, which is a reliable indicator of the risk of the surety not being reimbursed for claims paid on the principal's behalf.
A high personal credit score means the risk to the surety is low, which leads to a low premium rate. A low credit score signals a higher risk level, which results in a higher premium rate.
A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.
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