Maryland 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 Maryland 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 a Maryland Construction Bond?

When a contractor commits a regulatory or contractual violation, the project owner often experiences a significant financial loss. Maryland construction bonds protect against such losses by legally obligating the contractor (the bond’s “principal”) :

  1. to abide by Maryland’s construction regulations and the terms of the construction contract, and
  2. compensate the project owner (the bond’s “obligee”) for monetary damages resulting from a violation.

What Types of Maryland Construction Bonds May Be Needed?

In Maryland, certain types of contractors are licensed at the state level, and some municipalities may have their own licensing requirements. Obtaining a contractor license bond may be a prerequisite for state or local licensing. 

Maryland’s “Little Miller Act” requires performance bonds and payment bonds for state-funded construction projects valued above $100,000. Many private project owners also require performance and payment bonds.

Other construction bonds that may be required by both public and private project owners include:

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

How Does a Maryland Construction Bond Work?

The obligee and principal are two of the three parties to a Maryland construction bond. The third party is the bond’s guarantor (known as the “surety”). Although the principal is legally obligated to pay valid claims against a construction bond, the surety has guaranteed their payment. Therefore, the surety will pay the claimant directly, creating a debt that the principal must then repay. If the principal does not repay the funds in accordance with the surety’s credit terms, the surety can initiate legal action to recover the funds.

How Much Does It Cost?

To calculate the premium for a Maryland construction bond, the surety multiplies the bond amount by the premium rate. While the obligee establishes the required bond amount, the surety sets the premium rate based on the risk of not being repaid for claims paid on behalf of the principal. The risk of non-repayment is measured based on the principal’s personal credit score.

A high credit score means the risk to the surety is low, which makes a low premium rate appropriate. A low credit score indicates higher risk, which warrants a higher premium rate. 

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 Maryland 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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What Is a Maryland Construction Bond?

When a contractor commits a regulatory or contractual violation, the project owner often experiences a significant financial loss. Maryland construction bonds protect against such losses by legally obligating the contractor (the bond’s “principal”) :

  1. to abide by Maryland’s construction regulations and the terms of the construction contract, and
  2. compensate the project owner (the bond’s “obligee”) for monetary damages resulting from a violation.

In Maryland, certain types of contractors are licensed at the state level, and some municipalities may have their own licensing requirements. Obtaining a contractor license bond may be a prerequisite for state or local licensing. 

Maryland’s “Little Miller Act” requires performance bonds and payment bonds for state-funded construction projects valued above $100,000. Many private project owners also require performance and payment bonds.

Other construction bonds that may be required by both public and private project owners include:

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

The obligee and principal are two of the three parties to a Maryland construction bond. The third party is the bond’s guarantor (known as the “surety”). Although the principal is legally obligated to pay valid claims against a construction bond, the surety has guaranteed their payment. Therefore, the surety will pay the claimant directly, creating a debt that the principal must then repay. If the principal does not repay the funds in accordance with the surety’s credit terms, the surety can initiate legal action to recover the funds.

To calculate the premium for a Maryland construction bond, the surety multiplies the bond amount by the premium rate. While the obligee establishes the required bond amount, the surety sets the premium rate based on the risk of not being repaid for claims paid on behalf of the principal. The risk of non-repayment is measured based on the principal’s personal credit score.

A high credit score means the risk to the surety is low, which makes a low premium rate appropriate. A low credit score indicates higher risk, which warrants a higher premium rate. 

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

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