Louisiana 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 Louisiana Construction Bonds?
Louisiana construction bonds protect licensing authorities, project owners, and the public against financial losses caused by contractors. They help prevent such losses by requiring contractors to operate in full compliance with applicable laws and building codes. And in the event of a legal or contractual violation, they provide a way for the injured party to collect monetary damages from the contractor.
What Louisiana Construction Bonds May Be Needed?
Some commonly required construction bonds in Louisiana are:
Construction bonds may be required by state and/or local contractor licensing authorities. They also may be required by public or private project owners, particularly for larger projects.
Other Louisiana 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 Louisiana Construction Bonds Work?
There are three parties to every Louisiana construction bond:
- the obligee—the party requiring the bond,
- the principal—the contractor required to purchase the bond, and
- the surety—the bond’s guarantor.
Although the principal is legally obligated to pay valid claims, the surety guarantees timely payment to the claimant. So the surety will pay the claimant directly as an extension of credit to the principal. The principal must then repay the resulting debt to the surety. Failure to do so can result in the surety taking legal action to collect the debt.
How Much Do They Cost?
Louisiana construction bonds are sold for an annual premium that is calculated by multiplying two factors:
- the required bond amount set by the obligee, and
- the premium rate established by the surety through underwriting.
The primary underwriting concern is the risk of the surety not being reimbursed for claims paid on the principal’s behalf. That risk is measured largely on the basis of the principal’s personal credit score.
A high personal credit score means a low risk to the surety, which earns the principal a low premium rate. A low credit score means the risk level is higher, which warrants 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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