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 North Dakota Construction Bonds?
North Dakota construction bonds are surety bonds that help ensure that contractors working in North Dakota cause no financial harm to the state, project owners, or the public. They provide two levels of financial protection: preventive and compensatory. They mandate both regulatory and contractual compliance, and when violations do occur, they provide a way for injured parties to be compensated for monetary damages.
What North Dakota Construction Bonds May Be Needed?
Some commonly required construction bonds in North Dakota are:
These North Dakota construction bonds may be required by public or private project owners, particularly for larger projects.
Other North Dakota construction bonds that may be required include:
- Contractor license bonds (local only)
- Maintenance bonds
- Subdivision improvement bonds
- Solar decommissioning bonds
- Right of Way bonds
How Do North Dakota Construction Bonds Work?
There are three parties to every North Dakota construction bond:
- The party requiring the bond is called the “obligee,”
- The contractor purchasing the bond is referred to as the “principal,” and
- The bond’s guarantor is known as the “surety.”
The legal obligation to pay valid claims belongs solely to the principal. But the surety guarantees the payment of claims by agreeing to lend the principal the claim amount, if necessary. The surety will pay the claimant directly, creating a debt the principal must subsequently repay. Not repaying that debt can result in the surety suing the principal to recover the funds.
How Much Do They Cost?
To calculate the annual premium cost for a North Dakota construction bond, multiply the required bond amount by the premium rate the surety sets through underwriting. The underwriters use the principal’s personal credit score in assessing the risk of the surety not being repaid for the credit extended to the principal. A high personal credit score is indicative of a low risk to the surety, which should result in a low premium rate. A low credit score suggests greater risk, which deserves 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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