Hawaii 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 Hawaii 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?

This type of license and permit surety bond protects against financial loss for the state and parties that enter into contracts with a contractor licensed in Hawaii. The bond requires contractors to operate in compliance with Chapter 444 of the Hawaii Revised Statutes.

 

Who Needs One?

The Hawaii Contractors License Board determines, on a case-by-case basis, which residential or commercial contractors must furnish a contractor license bond as a condition for licensing. When a Hawaii contractor license bond is required, the minimum bond amount is $5,000, but the Board may require a higher amount. The bond will expire in two years when the contractor’s license expires and must be renewed at the same time.

How Does a Contractor License Bond Work?

Special terms are used to refer to the three parties to a Hawaii contractor license bond:

  • The “obligee” requiring the bond is the Hawaii Contractors License Board.
  • The “principal” is the contractor purchasing the bond.
  • And the “surety” is the bond’s guarantor.

The bond is legally binding on all three parties.

If the principal violates the terms of the surety bond agreement, causing he obligee, project owner, or other party a financial loss, the injured party can file a claim against the bond. If the surety’s investigation finds the claim to be valid, the principal is legally obligated to pay it. Unless the principal has the funds to pay a claim right away, the surety will pay it initially and give the principal a certain amount of time in which to repay that debt. Failing to repay it can result in the surety taking legal action to recover the funds, as the surety has no legal liability for claims.

How Much Does It Cost?

Hawaii contractor license bonds are sold for an annual premium that is the product of multiplying the required bond amount set by the obligee and the premium rate assigned to the principal by the surety. The premium rate is established through an underwriting assessment of the risk to the surety—specifically, the risk of not being repaid for claims paid by the surety on the principal’s behalf.

The surety’s underwriters rely on the principal’s personal credit score as the primary measure of the risk of non-repayment. A principal with a high credit score is considered to present little risk to the surety and will be assigned a low premium rate, typically somewhere between one and four percent. A low credit score, however, suggests a higher risk level, which warrants a significantly higher premium rate.

A high credit score indicates that the risk of the surety not being repaid for claims paid on the principal’s behalf is low, so the premium rate also will be low, perhaps even lower than 1%. A principal with a lower credit score suggests a higher risk level, which results in 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 Hawaii 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?

This type of license and permit surety bond protects against financial loss for the state and parties that enter into contracts with a contractor licensed in Hawaii. The bond requires contractors to operate in compliance with Chapter 444 of the Hawaii Revised Statutes.

 

The Hawaii Contractors License Board determines, on a case-by-case basis, which residential or commercial contractors must furnish a contractor license bond as a condition for licensing. When a Hawaii contractor license bond is required, the minimum bond amount is $5,000, but the Board may require a higher amount. The bond will expire in two years when the contractor’s license expires and must be renewed at the same time.

Special terms are used to refer to the three parties to a Hawaii contractor license bond:

  • The “obligee” requiring the bond is the Hawaii Contractors License Board.
  • The “principal” is the contractor purchasing the bond.
  • And the “surety” is the bond’s guarantor.

The bond is legally binding on all three parties.

If the principal violates the terms of the surety bond agreement, causing he obligee, project owner, or other party a financial loss, the injured party can file a claim against the bond. If the surety’s investigation finds the claim to be valid, the principal is legally obligated to pay it. Unless the principal has the funds to pay a claim right away, the surety will pay it initially and give the principal a certain amount of time in which to repay that debt. Failing to repay it can result in the surety taking legal action to recover the funds, as the surety has no legal liability for claims.

Hawaii contractor license bonds are sold for an annual premium that is the product of multiplying the required bond amount set by the obligee and the premium rate assigned to the principal by the surety. The premium rate is established through an underwriting assessment of the risk to the surety—specifically, the risk of not being repaid for claims paid by the surety on the principal’s behalf.

The surety’s underwriters rely on the principal’s personal credit score as the primary measure of the risk of non-repayment. A principal with a high credit score is considered to present little risk to the surety and will be assigned a low premium rate, typically somewhere between one and four percent. A low credit score, however, suggests a higher risk level, which warrants a significantly higher premium rate.

A high credit score indicates that the risk of the surety not being repaid for claims paid on the principal’s behalf is low, so the premium rate also will be low, perhaps even lower than 1%. A principal with a lower credit score suggests a higher risk level, which results in a higher premium rate.

 

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