Maine 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 Maine Construction Bonds?
Maine construction bonds provide a double layer of protection against financial losses caused by the unlawful or unethical actions of contractors. First, construction bonds require contractors to operate in compliance with the regulations governing construction in Maine, which helps prevent financial harm to the state or to project owners. Second, when contractors commit legal or contractual violations, construction bonds ensure that financially injured parties can recover monetary damages.
What Maine Construction Bonds May Be Needed?
Some commonly required construction bonds in Maine 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 Maine construction bonds that may be required include:
- Contractor license bonds
- Maintenance bonds
- Subdivision improvement bonds
- Solar decommissioning bonds
- Right of Way bonds
How Do Maine Construction Bonds Work?
There are three parties to every Maine construction bond, each with different rights and responsibilities:
- The party requiring the bond, the “obligee,” sets the required bond amount.
- The contractor, the “principal,” is legally obligated to pay valid claims.
- The bond’s guarantor, the “surety,” guarantees the principal’s payment of claims and assigns the premium rate the principal will pay.
Although the principal is legally obligated to pay valid claims, the surety will pay a claim initially as an extension of credit to the principal. The principal must then repay the loan according to the surety’s terms or risk being sued.
How Much Do They Cost?
Maine construction bonds cost only a small percentage of the required bond amount, paid as an annual premium. That percentage, the premium rate, is assigned by the underwriters based on the perceived risk of the principal not repaying the surety for claims paid on the principal’s behalf. The principal’s personal credit score is the primary metric for risk.
A high credit score is evidence of a low-risk level, which leads to a low premium rate. A low credit score, however, signals 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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