Vermont Construction Bonds

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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 Vermont Construction Bonds?

Vermont construction bonds are designed to provide protection against financial losses caused by contractors. Construction bonds require contractors to operate lawfully and ethically and also compensate the injured parties for monetary damages when they don’t.

What Vermont Construction Bonds May Be Needed?

Some commonly required construction bonds in Vermont are:

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.

The following Vermont construction bonds may also be required for contractors operating in the state:

  • Contractor license bonds (state and local)
  • Maintenance bonds
  • Subdivision improvement bonds
  • Solar decommissioning bonds
  • Right of Way bonds

How Do Vermont Construction Bonds Work?

There are three parties to every Vermont construction bond. In the lingo of surety bonds, these are known as:

  • The obligee – the party requiring the bond,
  • The principal – the contractor required to post the bond, and
  • The surety – the bond’s guarantor.

Each party has certain rights and responsibilities. The principal bears the full legal obligation to pay claims the surety’s investigation finds to be valid. The surety guarantees the payment of claims by establishing a line of credit that can be used to pay claims, if necessary. The usual practice is for the surety to pay the claim initially as an extension of credit to the principal. The principal must then repay the resulting debt. Failing to do so can result in the surety taking legal action against the principal to recover the funds.

How Much Do They Cost?

The annual premium for a Vermont construction bond is the product of multiplying the required bond amount established by the obligee and the premium rate set by the surety through an underwriting risk assessment. The main risk to the surety is the risk of not being repaid for claims paid on the principal’s behalf. That risk is measured based on the principal’s personal credit score.

A creditworthy principal with a high credit score is a low risk to the surety and deserves a low premium rate. A principal with lesser credit is a higher risk, resulting 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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