Rhode Island 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 Rhode Island 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?

Not all Rhode Island contractors will be required to purchase a contractor license bond. But when a Rhode Island contractor license bond is required, it’s to provide some financial protection for the licensing authority and the public against monetary losses resulting from a licensed contractor’s failure to comply with applicable statutes and regulations. When a covered loss occurs, the injured party can file a claim against the bond and be compensated for damages.

 

Who Needs One?

In Rhode Island, there is no statewide licensing of contractors. The only licensing occurs at the local level, and only in certain municipalities. In some jurisdictions, obtaining a local contractor’s license requires the contractor to purchase a contractor license surety bond.

How Does a Contractor License Bond Work?

There are three parties to a Rhode Island contractor license bond:

  • the local licensing authority (the “obligee”) requiring the bond, 
  • the contractor (the “principal”) purchasing the bond, and 
  • the “surety” guaranteeing the bond. 

As the guarantor, the surety guarantees the principal will pay all valid claims. However, the surety has no legal responsibility for them. Instead, the surety agrees to extend credit to the principal for the purpose of paying claims. But the surety does not cut a check to the principal.

When a claim is filed against the bond, and the surety finds the claim to be valid, the principal is legally obligated to pay it. The usual practice is for the surety to pay the claim on the principal’s behalf. The principal must then repay the surety by a certain date. If the debt is not repaid, the surety can take legal action to recover the debt owed by the principal. 

How Much Does It Cost?

The annual premium for a Rhode Island contractor license bond is calculated by multiplying two factors—the required bond amount set by the obligee and the premium rate assigned to the principal by the surety through underwriting. 

The primary underwriting goal is to assign a premium rate that is high enough to mitigate the risk of the surety not being repaid for claims paid on the principal’s behalf. The usual measure of risk is the principal’s personal credit score. 

A high credit score strongly indicates a low risk to the surety, which should result in a low premium rate. A low credit score is a sign of higher risk, which demands a higher premium rate. The premium rate for a well-qualified principal 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 Rhode Island 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?

Not all Rhode Island contractors will be required to purchase a contractor license bond. But when a Rhode Island contractor license bond is required, it’s to provide some financial protection for the licensing authority and the public against monetary losses resulting from a licensed contractor’s failure to comply with applicable statutes and regulations. When a covered loss occurs, the injured party can file a claim against the bond and be compensated for damages.

 

In Rhode Island, there is no statewide licensing of contractors. The only licensing occurs at the local level, and only in certain municipalities. In some jurisdictions, obtaining a local contractor’s license requires the contractor to purchase a contractor license surety bond.

There are three parties to a Rhode Island contractor license bond:

  • the local licensing authority (the “obligee”) requiring the bond, 
  • the contractor (the “principal”) purchasing the bond, and 
  • the “surety” guaranteeing the bond. 

As the guarantor, the surety guarantees the principal will pay all valid claims. However, the surety has no legal responsibility for them. Instead, the surety agrees to extend credit to the principal for the purpose of paying claims. But the surety does not cut a check to the principal.

When a claim is filed against the bond, and the surety finds the claim to be valid, the principal is legally obligated to pay it. The usual practice is for the surety to pay the claim on the principal’s behalf. The principal must then repay the surety by a certain date. If the debt is not repaid, the surety can take legal action to recover the debt owed by the principal.

The annual premium for a Rhode Island contractor license bond is calculated by multiplying two factors—the required bond amount set by the obligee and the premium rate assigned to the principal by the surety through underwriting. 

The primary underwriting goal is to assign a premium rate that is high enough to mitigate the risk of the surety not being repaid for claims paid on the principal’s behalf. The usual measure of risk is the principal’s personal credit score. 

A high credit score strongly indicates a low risk to the surety, which should result in a low premium rate. A low credit score is a sign of higher risk, which demands a higher premium rate. The premium rate for a well-qualified principal usually is in the range of 1% to 3%.

 

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