Indiana 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 Indiana Construction Bonds?
Indiana construction bonds help ensure the integrity of the state’s construction industry and the contractors working in it. Bonded contractors are required to operate in accordance with the laws governing the industry. And when contractors commit violations that cause financial losses for project owners, construction bonds provide a way to compensate them for the financial damages.
What Indiana Construction Bonds May Be Needed?
Some commonly required construction bonds in Indiana 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 Indiana construction bonds that may be required include:
- Contractor license bonds
- Maintenance bonds
- Subdivision improvement bonds
- Solar decommissioning bonds
- Right of Way bonds
How Do Indiana Construction Bonds Work?
Every Indiana construction bond is a legally binding contract among three parties:
- the “obligee,” the party requiring the bond,
- the “principal,” the contractor required to purchase the bond, and
- the “surety,” the bond’s guarantor.
The legal obligation to pay valid claims belongs to the principal alone. But as the bond’s guarantor, the surety has agreed to pay valid claims initially as an extension of credit to the principal. Paying a claim on the principal’s behalf creates a debt that the principal must then repay to the surety. The surety can sue the principal, if need be, to recover the debt.
How Much Do They Cost?
Calculating an Indiana construction bond’s annual premium cost is a simple matter of multiplying the required bond amount by the premium rate assigned to the principal by the surety through underwriting. The primary underwriting consideration is the risk of the surety not being repaid for claims paid on the principal’s behalf, which is measured based on the principal's personal credit score.
A high personal credit score is a strong indication of low risk to the surety, which earns the principal a low premium rate. A low credit score, however, is a sign of higher risk, 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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