Montana 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 Montana 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 Montana Construction Bond?

Montana construction bonds serve the important purpose of protecting project owners against monetary damages experienced when a contractor violates regulatory or contractual requirements. The contractor is legally obligated to compensate the project owner or other injured party with a valid claim for a monetary loss caused by such violations. 

What Types of Montana Construction Bonds May Be Needed?

The contractors licensed by Montana at the state level do not have to purchase a bond as a condition for licensing. However, local contracting authorities that have their own licensing process may require a contractor license bond. 

Montana’s “Little Miller Act,” requires contractors to furnish project owners with performance bonds and payment bonds before they can enter into a contract for a state-funded construction project valued above a certain threshold amount. Although privately funded construction projects aren’t subject to the Little Miller Act, many private project owners are requiring performance and payment bonds, particularly for higher value projects. When selecting a contractor through competitive bidding, any project owner can require a bid bond from each bidder.

Other construction bonds that may be required in Montana include:

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

How Does a Montana Construction Bond Work?

The three parties to any construction bond are:

  • The government contracting authority or private project owner (known as the “obligee”),
  • The contractor (the bond’s “principal”), and 
  • The party guaranteeing the bond (called the “surety”).

The legal obligation to pay valid claims is exclusively the principal’s. But the surety guarantees that legitimate claims will be paid by agreeing to lend funds to the principal for that purpose. 

The process is relatively simple. The surety pays the claim on behalf of the principal, and the principal repays the resulting debt according to the surety’s credit terms. Not repaying the surety will most likely trigger legal debt recovery action.

How Much Does It Cost?

The annual premium for a Montana construction bond is the product of multiplying the bond amount by the premium rate. The obligee establishes the bond amount, and the surety sets the premium rate through an underwriting risk assessment. The main risk to the surety is not being repaid for the credit extended in paying claims on the principal’s behalf. The surety measures that risk largely on the basis of the principal’s personal credit score. 

A high credit score means the risk to the surety is low, so the premium rate is low as well. A low credit score is a strong sign of higher risk, 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 Montana 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 Montana Construction Bond?

Montana construction bonds serve the important purpose of protecting project owners against monetary damages experienced when a contractor violates regulatory or contractual requirements. The contractor is legally obligated to compensate the project owner or other injured party with a valid claim for a monetary loss caused by such violations. 

 

The contractors licensed by Montana at the state level do not have to purchase a bond as a condition for licensing. However, local contracting authorities that have their own licensing process may require a contractor license bond. 

Montana’s “Little Miller Act,” requires contractors to furnish project owners with performance bonds and payment bonds before they can enter into a contract for a state-funded construction project valued above a certain threshold amount. Although privately funded construction projects aren’t subject to the Little Miller Act, many private project owners are requiring performance and payment bonds, particularly for higher value projects. When selecting a contractor through competitive bidding, any project owner can require a bid bond from each bidder.

Other construction bonds that may be required in Montana include:

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

The three parties to any construction bond are:

  • The government contracting authority or private project owner (known as the “obligee”),
  • The contractor (the bond’s “principal”), and 
  • The party guaranteeing the bond (called the “surety”).

The legal obligation to pay valid claims is exclusively the principal’s. But the surety guarantees that legitimate claims will be paid by agreeing to lend funds to the principal for that purpose. 

The process is relatively simple. The surety pays the claim on behalf of the principal, and the principal repays the resulting debt according to the surety’s credit terms. Not repaying the surety will most likely trigger legal debt recovery action.

The annual premium for a Montana construction bond is the product of multiplying the bond amount by the premium rate. The obligee establishes the bond amount, and the surety sets the premium rate through an underwriting risk assessment. The main risk to the surety is not being repaid for the credit extended in paying claims on the principal’s behalf. The surety measures that risk largely on the basis of the principal’s personal credit score. 

A high credit score means the risk to the surety is low, so the premium rate is low as well. A low credit score is a strong sign of higher risk, 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 Montana construction bond.