Arizona Construction Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about Arizona construction bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

 

What Is an Arizona Construction Bond?

All Arizona construction bonds, regardless of the specific type, share a common purpose—protecting a government contracting authority (state or local) or private project owner from the financial harm that can occur because of a contractor’s legal or contractual violation. 

What Types of Arizona Construction Bonds May Be Needed?

In Arizona, contractors must be licensed at the state level.  Furnishing the licensing authority with a contractor license bond is a prerequisite for obtaining a license.

Arizona’s Little Miller Act requires contractors to furnish both performance bonds and payment bonds in order to work on government-funded construction projects. The contracting authority may also require contractors bidding on public works jobs to purchase bid bonds. It’s becoming more common for private project owners to require these bonds as well.

Performance, payment, and bond bonds are the most commonly required Arizona construction surety bonds. But both public and private project owners may also require one or more of the following:

  • Maintenance bonds
  • Subdivision/site improvement bonds
  • Supply bonds
  • Solar decommissioning bonds
  • Right of Way bonds
  • Contractor license bond

How Does an Arizona Construction Bond Work?

There are three parties to an Arizona construction bond. They are referred to as the:

  • Obligee—the contracting authority or private project owner requiring the bond
  • Principal—the contractor who must furnish the bond
  • Surety—the bond’s guarantor

The principal is legally obligated to pay valid claims up to the required bond amount established by the obligee. However, in guaranteeing the payment of claims, the surety has agreed to lend the principal funds for that purpose. 

The surety will pay the claim as an extension of credit to the principal and will give the principal a certain amount of time to repay the resulting debt. The surety will initiate legal action against the principal to recover the debt, if necessary.

How Much Does It Cost?

The annual premium cost of an Arizona construction bond is determined through underwriting, which sets the premium rate for the particular principal based largely on the principal’s personal credit score. This is considered the best measure of the risk of the surety not being repaid for claims paid on behalf of the principal. 

A principal with a high credit score is perceived as a low risk to the surety, so the premium rate will also be low. 

The premium rate for a principal with good credit usually is in the range of 1% to 3%.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about Arizona construction bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

 

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FREE CONSTRUCTION BOND QUOTE

What Is an Arizona Construction Bond?

All Arizona construction bonds, regardless of the specific type, share a common purpose—protecting a government contracting authority (state or local) or private project owner from the financial harm that can occur because of a contractor’s legal or contractual violation. 

 

In Arizona, contractors must be licensed at the state level.  Furnishing the licensing authority with a contractor license bond is a prerequisite for obtaining a license.

Arizona’s Little Miller Act requires contractors to furnish both performance bonds and payment bonds in order to work on government-funded construction projects. The contracting authority may also require contractors bidding on public works jobs to purchase bid bonds. It’s becoming more common for private project owners to require these bonds as well.

Performance, payment, and bond bonds are the most commonly required Arizona construction surety bonds. But both public and private project owners may also require one or more of the following:

  • Maintenance bonds
  • Subdivision/site improvement bonds
  • Supply bonds
  • Solar decommissioning bonds
  • Right of Way bonds
  • Contractor license bond

There are three parties to an Arizona construction bond. They are referred to as the:

  • Obligee—the contracting authority or private project owner requiring the bond
  • Principal—the contractor who must furnish the bond
  • Surety—the bond’s guarantor

The principal is legally obligated to pay valid claims up to the required bond amount established by the obligee. However, in guaranteeing the payment of claims, the surety has agreed to lend the principal funds for that purpose. 

The surety will pay the claim as an extension of credit to the principal and will give the principal a certain amount of time to repay the resulting debt. The surety will initiate legal action against the principal to recover the debt, if necessary.

The annual premium cost of an Arizona construction bond is determined through underwriting, which sets the premium rate for the particular principal based largely on the principal’s personal credit score. This is considered the best measure of the risk of the surety not being repaid for claims paid on behalf of the principal. 

A principal with a high credit score is perceived as a low risk to the surety, so the premium rate will also be low. 

The premium rate for a principal with good credit usually is in the range of 1% to 3%.

 

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