Delaware Contractor License 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 Delaware contractor license 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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What Is a Contractor License Bond?

When a Delaware contractor license bond is required, the purpose is to protect the licensing body against financial losses caused by a licensed contractor. The terms of the surety bond agreement obligate the contractor to operate in compliance with all applicable state laws and local ordinances, and building codes. Violations give the licensing body (the bond’s “obligee”) the right to file a claim against the bond and be compensated by the contractor (the bond’s “principal”) for damages.

 

Who Needs One?

All contractors doing business in Delaware must register with and obtain a business license from the Delaware Division of Revenue. Only contractors based in a state other than Delaware are subject to a bonding requirement at the state level. However, some Delaware counties and municipalities require contractors to post a license bond to be able to work within their jurisdiction.

How Does a Contractor License Bond Work?

Every Delaware contractor license bond is a legally binding contract between the obligee, the principal, and the bond’s guarantor (known as the “surety”).

  • The obligee establishes the required bond amount (the bond’s “penal sum”).
  • The principal is legally obligated to pay all valid claims.
  • The surety extends credit to the principal for the purpose of paying valid claims, if necessary. The surety determines whether each claim is valid and assigns the premium rate that determines how much the principal will pay as the bond’s annual premium.

Because the surety has guaranteed the payment of valid claims, the usual practice is for the surety to pay a claim initially and then be repaid for that debt by the principal. If repayment is not made within the allotted time, the surety can take legal action against the principal to recover the claim amount, plus legal fees and court costs.

How Much Does It Cost?

The annual premium for a Delaware contractor license bond is the product of multiplying the bond’s penal sum by the premium rate the surety assigns through underwriting. The underwriters are mainly concerned about the risk of the surety not being repaid by the principal and having to pursue the matter in court. That risk is measured primarily on the basis of the principal’s personal credit score.

The main underwriting concern is the risk of the surety not being repaid for claims paid on behalf of the principal. The risk of non-repayment is assessed largely on the basis of the principal’s personal credit score.

A principal with a high credit score is regarded as being a low risk to the surety, which results in a premium rate that could be 1% or even less. Conversely, a principal with poor credit is considered to be a higher risk to the surety, which warrants a higher premium rate.

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

 

CONTACT US FOR A

FREE CONSTRUCTION BOND QUOTE

What Is a Contractor License Bond?

When a Delaware contractor license bond is required, the purpose is to protect the licensing body against financial losses caused by a licensed contractor. The terms of the surety bond agreement obligate the contractor to operate in compliance with all applicable state laws and local ordinances, and building codes. Violations give the licensing body (the bond’s “obligee”) the right to file a claim against the bond and be compensated by the contractor (the bond’s “principal”) for damages.

 

All contractors doing business in Delaware must register with and obtain a business license from the Delaware Division of Revenue. Only contractors based in a state other than Delaware are subject to a bonding requirement at the state level. However, some Delaware counties and municipalities require contractors to post a license bond to be able to work within their jurisdiction.

Every Delaware contractor license bond is a legally binding contract between the obligee, the principal, and the bond’s guarantor (known as the “surety”).

  • The obligee establishes the required bond amount (the bond’s “penal sum”).
  • The principal is legally obligated to pay all valid claims.
  • The surety extends credit to the principal for the purpose of paying valid claims, if necessary. The surety determines whether each claim is valid and assigns the premium rate that determines how much the principal will pay as the bond’s annual premium.

Because the surety has guaranteed the payment of valid claims, the usual practice is for the surety to pay a claim initially and then be repaid for that debt by the principal. If repayment is not made within the allotted time, the surety can take legal action against the principal to recover the claim amount, plus legal fees and court costs.

The annual premium for a Delaware contractor license bond is the product of multiplying the bond’s penal sum by the premium rate the surety assigns through underwriting. The underwriters are mainly concerned about the risk of the surety not being repaid by the principal and having to pursue the matter in court. That risk is measured primarily on the basis of the principal’s personal credit score.

The main underwriting concern is the risk of the surety not being repaid for claims paid on behalf of the principal. The risk of non-repayment is assessed largely on the basis of the principal’s personal credit score.

A principal with a high credit score is regarded as being a low risk to the surety, which results in a premium rate that could be 1% or even less. Conversely, a principal with poor credit is considered to be a higher risk to the surety, which warrants a higher premium rate.

 

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