Illinois 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 Illinois Construction Bonds?
Illinois construction bonds are designed to provide protection against financial losses caused by contractors. Construction bonds require contractors to operate lawfully and ethically and also compensate the injured parties for monetary damages when they don’t.
What Illinois Construction Bonds May Be Needed?
Some commonly required construction bonds in Illinois 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 Illinois 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 Illinois Construction Bonds Work?
There are three parties to every Illinois construction bond: the obligee, the principal, and the surety.
- The obligee is the party requiring the bond,
- The principal is the contractor required to purchase the bond, and
- The surety is the bond’s guarantor.
Although the principal is legally obligated to pay valid claims, the surety guarantees their payment by agreeing to extend credit to the principal if necessary. The surety pays the claimant directly, which is essentially a loan to the principal. The principal must then repay the surety or face legal debt recovery proceedings.
How Much Do They Cost?
Illinois construction bonds are sold for an annual premium calculated by multiplying the required bond amount (set by the obligee) and the premium rate (assigned set by the surety). The premium rate is based largely on the principal's personal credit score, which is a measure of the risk of the surety not being repaid by the principal.
A high personal credit score is correlated with a low risk to the surety, which means the premium rate will also be low. A low credit score indicates a higher risk level, resulting 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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