Missouri 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 Missouri 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 Missouri Construction Bond?

Missouri construction bonds serve the important purpose of protecting project owners (public or private) against the unanticipated costs incurred when a contractor fails to comply with regulatory or contractual requirements. The contractor (known as the bond’s “principal”) is legally obligated to compensate the project owner (the bond’s “obligee”) or other injured party with a valid claim for monetary damages caused by such unlawful or unethical actions. 

What Types of Missouri Construction Bonds May Be Needed?

Missouri licenses certain contractors at the state level, which does not involve purchasing a bond. However, local jurisdictions that have their own licensing or permitting rules may require a contractor license bond. 

Missouri’s “Little Miller Act,” mandates the purchase of performance bonds and payment bonds by contractors before they can work on state-funded construction projects valued above a certain dollar amount. The Little Miller Act does not apply to privately funded construction projects, but many private project owners require performance and payment bonds anyway to protect themselves and their investors, particularly for larger projects. Also, any project owner (referred to as the “obligee” in the lingo of surety bonds) can require a bid bond from each contractor (the bond’s “principal’) in competitive bidding situations.

Other construction bonds that may be required in Missouri include:

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

How Does a Missouri Construction Bond Work?

Every Missouri construction bond involves three parties—the previously mentioned obligee and principal plus the bond’s guarantor (called the “surety”). The principal is legally obligated to pay valid claims but may not have enough cash available immediately to do so. That’s why the surety guarantees the payment of claims by agreeing to extend credit to the principal for that purpose. 

The surety will pay a valid claim on the principal’s behalf, and the principal must then repay the resulting debt in accordance with the surety’s credit terms. A principal who does not repay the surety can expect to become the target of a lawsuit brought by the surety to recover the funds.

How Much Does It Cost?

To calculate the annual premium for a Missouri construction bond, the surety sets the premium rate and multiplies the bond amount by that percentage. The surety assigns the premium rate through an underwriting assessment of the risk of not being repaid for the credit extended in paying valid claims on the principal’s behalf. The standard measure of that risk is the principal’s personal credit score.

A high credit score is viewed as strong evidence of a low risk to the surety, which leads to a low premium rate. A low credit score means the risk level is higher, so the premium rate will be higher. 

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 Missouri 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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FREE CONSTRUCTION BOND QUOTE

What Is a Missouri Construction Bond?

Missouri construction bonds serve the important purpose of protecting project owners (public or private) against the unanticipated costs incurred when a contractor fails to comply with regulatory or contractual requirements. The contractor (known as the bond’s “principal”) is legally obligated to compensate the project owner (the bond’s “obligee”) or other injured party with a valid claim for monetary damages caused by such unlawful or unethical actions. 

 

Missouri licenses certain contractors at the state level, which does not involve purchasing a bond. However, local jurisdictions that have their own licensing or permitting rules may require a contractor license bond. 

Missouri’s “Little Miller Act,” mandates the purchase of performance bonds and payment bonds by contractors before they can work on state-funded construction projects valued above a certain dollar amount. The Little Miller Act does not apply to privately funded construction projects, but many private project owners require performance and payment bonds anyway to protect themselves and their investors, particularly for larger projects. Also, any project owner (referred to as the “obligee” in the lingo of surety bonds) can require a bid bond from each contractor (the bond’s “principal’) in competitive bidding situations.

Other construction bonds that may be required in Missouri include:

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

Every Missouri construction bond involves three parties—the previously mentioned obligee and principal plus the bond’s guarantor (called the “surety”). The principal is legally obligated to pay valid claims but may not have enough cash available immediately to do so. That’s why the surety guarantees the payment of claims by agreeing to extend credit to the principal for that purpose. 

The surety will pay a valid claim on the principal’s behalf, and the principal must then repay the resulting debt in accordance with the surety’s credit terms. A principal who does not repay the surety can expect to become the target of a lawsuit brought by the surety to recover the funds.

To calculate the annual premium for a Missouri construction bond, the surety sets the premium rate and multiplies the bond amount by that percentage. The surety assigns the premium rate through an underwriting assessment of the risk of not being repaid for the credit extended in paying valid claims on the principal’s behalf. The standard measure of that risk is the principal’s personal credit score.

A high credit score is viewed as strong evidence of a low risk to the surety, which leads to a low premium rate. A low credit score means the risk level is higher, so the premium rate will be higher. 

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 Missouri construction bond.