Illinois 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 Illinois 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 Illinois Construction Bond?

Illinois construction bonds serve an important purpose—protecting project owners and the public against the negative financial impact of contractors’ regulatory or contractual violations. Construction bonds give contractors a financial incentive to do business in a lawful and ethical manner, as noncompliance may require them to compensate the injured party for monetary damages.

What Types of Illinois Construction Bonds May Be Needed?

Illinois licenses construction contractors at the state level, which requires the purchase of a contractor license bond. Additionally, some Illinois municipalities have local licensing and bonding requirements.

Illinois’s “Little Miller Act” requires performance bonds and payment bonds from contractors working on state-funded public works projects estimated to be above a certain threshold level in terms of value. Some local government entities and many private project owners also have performance and payment bonding requirements. Bid bonds may also be required by project owners that award construction contracts through a competitive bidding process.

In addition to these bonds, which are by far the most common Illinois construction bonds, both public and private project owners may require others, such as:

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

How Does an Illinois Construction Bond Work?

The three parties to an Illinois construction bond are known as the:

  • Obligee—the public or private project owner requiring the bond
  • Principal—the contractor required to purchase the bond
  • Surety—the bond’s guarantor

Although the legal obligation to pay valid claims belongs solely to the principal, the surety guarantees their payment. Consequently, the surety will pay the claimant directly as an extension of credit to the principal. The resulting debt must be repaid by the principal according to the surety’s credit terms. Not repaying the surety can result in legal action to recover the funds.

How Much Does It Cost?

The annual premium for an Illinois construction bond is a small percentage of the bond amount. The surety establishes that percentage, the premium rate, based on the risk of not being repaid for claims paid on behalf of the principal. The most reliable measure of that risk is the principal’s personal credit score.

A high credit score means the risk is low, and the premium rate will also be low. A lower credit score leads to a higher premium to compensate for the higher risk level.

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 Illinois 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.

CONTACT US FOR A

FREE CONSTRUCTION BOND QUOTE

What Is an Illinois Construction Bond?

Illinois construction bonds serve an important purpose—protecting project owners and the public against the negative financial impact of contractors’ regulatory or contractual violations. Construction bonds give contractors a financial incentive to do business in a lawful and ethical manner, as noncompliance may require them to compensate the injured party for monetary damages.

 

Illinois licenses construction contractors at the state level, which requires the purchase of a contractor license bond. Additionally, some Illinois municipalities have local licensing and bonding requirements.

Illinois’s “Little Miller Act” requires performance bonds and payment bonds from contractors working on state-funded public works projects estimated to be above a certain threshold level in terms of value. Some local government entities and many private project owners also have performance and payment bonding requirements. Bid bonds may also be required by project owners that award construction contracts through a competitive bidding process.

In addition to these bonds, which are by far the most common Illinois construction bonds, both public and private project owners may require others, such as:

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

The three parties to an Illinois construction bond are known as the:

  • Obligee—the public or private project owner requiring the bond
  • Principal—the contractor required to purchase the bond
  • Surety—the bond’s guarantor

Although the legal obligation to pay valid claims belongs solely to the principal, the surety guarantees their payment. Consequently, the surety will pay the claimant directly as an extension of credit to the principal. The resulting debt must be repaid by the principal according to the surety’s credit terms. Not repaying the surety can result in legal action to recover the funds.

The annual premium for an Illinois construction bond is a small percentage of the bond amount. The surety establishes that percentage, the premium rate, based on the risk of not being repaid for claims paid on behalf of the principal. The most reliable measure of that risk is the principal’s personal credit score.

A high credit score means the risk is low, and the premium rate will also be low. A lower credit score leads to a higher premium to compensate for the higher risk level.

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

REQUEST A QUOTE

Request a quote online or call today to speak with one of our surety bond experts about obtaining an Illinois construction bond.