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 South Carolina Construction Bonds?
South Carolina construction bonds are designed to protect against financial losses stemming from contractors failing to abide by state laws, local regulations, building codes, and/or contractual obligations. When violations do occur, construction bonds provide a way to compensate the injured parties for monetary damages.
What South Carolina Construction Bonds May Be Needed?
The most commonly required construction bonds in South Carolina are:
Construction bonds may be required by public or private project owners, particularly for larger projects. In municipalities that require local licensing of contractors, contractor license bonds may be required.
Other South Carolina construction bonds that project owners may need to purchase include:
- Contractor license bonds (local only)
- Maintenance bonds
- Subdivision improvement bonds
- Solar decommissioning bonds
- Right of Way bonds
How Do South Carolina Construction Bonds Work?
A South Carolina construction bond is a legally binding contract involving three parties.
- The party requiring the bond is known as the obligee,
- The contractor purchasing the bond is called the principal, and
- The bond’s guarantor is referred to as the surety.
The legal obligation to pay valid claims belongs entirely to the principal. But as the bond’s guarantor, the surety will extend credit to the principal, if necessary, for the purpose of paying claims. The surety pays the claimant directly, and the principal must then repay the debt to the surety or face legal debt recovery proceedings.
How Much Do They Cost?
The annual premium for a South Carolina construction bond is a fraction of the required bond amount. That fraction is the premium rate, which is determined through an underwriting assessment of the risk of the surety not being repaid for claims paid on the principal’s behalf. That risk is measured by the principal’s personal credit score.
A high personal credit score is correlated with a low risk of non-repayment, so the premium rate will also be low. A low credit score means the risk to the surety 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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