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 Ohio Construction Bonds?
Ohio construction bonds are surety bonds that help ensure that contractors operating in Ohio do so in accordance with applicable laws and regulations and the terms of the construction contract. The purpose is to provide financial protection for the state, project owners, and the public against financial losses resulting from regulatory and contractual violations. When losses do occur, the injured party can file a claim for monetary damages.
What Ohio Construction Bonds May Be Needed?
Some commonly required construction bonds in Ohio are:
These bonds may be required by public or private project owners, particularly for larger projects.
Other Ohio construction bonds that project owners may require include:
- Contractor license bonds (local only)
- Maintenance bonds
- Subdivision improvement bonds
- Solar decommissioning bonds
- Right of Way bonds
How Do Ohio Construction Bonds Work?
Every Ohio construction bond is a three-way legally binding contract among these parties:
- The “obligee” requiring the bond,
- The “principal” purchasing the bond, and
- The “surety” guaranteeing the payment of claims.
Although the principal is legally obligated to pay valid claims, the surety guarantees their payment by agreeing to lend the principal the funds necessary to pay them. In fact, the surety will pay the claim initially as an extension of credit to the principal. If the principal does not repay the resulting debt, the surety can take legal action to recover the funds.
How Much Do They Cost?
The annual premium cost for a construction bond is the result of multiplying two figures—the required bond amount and the premium rate, which is assigned by the surety on a case-by-case basis through underwriting.
The underwriters assess the risk of the surety not being repaid for the debt created by paying claims on the principal’s behalf. A principal with a high personal credit score is viewed as a low risk to the surety, so the premium rate will be low. A principal with a lower credit score poses a greater risk, 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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