Iowa 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 Iowa Construction Bonds?
Iowa construction bonds help ensure that contractors working in the state operate in full compliance with the law and the terms of their contracts with project owners. But when violations do occur, construction bonds provide a way for the injured parties to be compensated for their financial losses.
What Iowa Construction Bonds May Be Needed?
Some commonly required construction bonds in Iowa are:
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 Iowa construction bonds that project owners may require include:
- Maintenance bonds
- Subdivision improvement bonds
- Solar decommissioning bonds
- Right of Way bonds
How Do Iowa Construction Bonds Work?
Every Iowa construction bond is legally binding for the party requiring the bond, the contractor purchasing the bond, and the bond’s guarantor, known respectively as the obligee, the principal, and the surety.
The principal is legally obligated to pay valid claims, but the surety guarantees they will be paid. This guarantee is in the form of an agreement to extend credit to the principal for the purpose of paying claims. The surety does this by paying a valid claim initially and then being repaid by the principal. Not repaying that debt can result in the principal taking legal action to recover the funds.
How Much Do They Cost?
The annual premium cost of an Iowa construction bond is determined by multiplying two factors: the required bond amount set by the obligee and the premium rate assigned to the principal by the surety. The premium rate reflects the underwriters’ assessment of the risk of the principal not repaying the surety. That risk is gauged based on the principal’s personal credit score.
A high credit score means there is little risk of the surety not being repaid for claims paid on the principal’s behalf, so the premium rate will be low. A low credit score, however, means the risk to the surety is higher, 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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