New York 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 New York 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 New York Construction Bond?

New York construction bonds are surety bonds that serve both a preventive and a compensatory function in protecting construction project owners against financial losses caused by their contractors. They accomplish this dual purpose by:

  1. Requiring contractors to operate in full compliance with both regulatory statutes and contractual obligations, and
  2. Making it their legal responsibility to compensate project owners with valid claims for financial harm caused by contractor noncompliance

What Types of New York Construction Bonds May Be Needed?

In New York, only a few types of specialty contractors must be licensed at the state level, which in some cases may involve the purchase of a contractor license bond. Some local jurisdictions have licensing and bonding requirements for both general and specialty contractors.

New York’s “Little Miller Act” mandates performance bonds and payment bonds from contractors as a condition for signing a contract for a public works or other state-funded project valued above $100,000. Additionally, many private project owners require performance and payment bonds to protect themselves and any investors. Both government contracting entities and private project owners have the option of requiring bid bonds from contractors competing for a construction contract.

Other construction bonds that contractors in New York may need include:

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

How Does a New York Construction Bond Work?

Every construction bond is legally binding on these three parties:

  • The project owner requiring the bond (known as the bond’s obligee),
  • The contractor purchasing the bond (the principal), and
  • The party guaranteeing the payment of claims (the surety).

The principal is legally obligated to pay all claims the surety finds to be valid. But, as the bond’s guarantor, the surety has agreed to extend credit to the principal for the payment of claims. The usual practice is for the surety to pay the claim on the principal’s behalf and then be repaid by the principal. 

The surety will most likely initiate legal debt recovery procedures if the principal does not make full repayment in compliance with the surety’s credit terms.

How Much Does It Cost?

The annual premium for a New York construction bond is the product of multiplying the bond amount by the premium rate assigned by the surety. The premium rate is based largely on the risk of the surety not being repaid for claims paid on the principal’s behalf. The standard measure of the risk of non-repayment is the principal’s personal credit score.

A high credit score is reliable evidence of a low risk to the surety, which merits a low premium rate. And a low credit score means the risk is greater, so the premium rate will be higher.

The premium rate for a contractor 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 New York 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 New York Construction Bond?

New York construction bonds are surety bonds that serve both a preventive and a compensatory function in protecting construction project owners against financial losses caused by their contractors. They accomplish this dual purpose by:

  1. Requiring contractors to operate in full compliance with both regulatory statutes and contractual obligations, and
  2. Making it their legal responsibility to compensate project owners with valid claims for financial harm caused by contractor noncompliance

 

In New York, only a few types of specialty contractors must be licensed at the state level, which in some cases may involve the purchase of a contractor license bond. Some local jurisdictions have licensing and bonding requirements for both general and specialty contractors.

New York’s “Little Miller Act” mandates performance bonds and payment bonds from contractors as a condition for signing a contract for a public works or other state-funded project valued above $100,000. Additionally, many private project owners require performance and payment bonds to protect themselves and any investors. Both government contracting entities and private project owners have the option of requiring bid bonds from contractors competing for a construction contract.

Other construction bonds that contractors in New York may need include:

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

Every construction bond is legally binding on these three parties:

  • The project owner requiring the bond (known as the bond’s obligee),
  • The contractor purchasing the bond (the principal), and
  • The party guaranteeing the payment of claims (the surety).

The principal is legally obligated to pay all claims the surety finds to be valid. But, as the bond’s guarantor, the surety has agreed to extend credit to the principal for the payment of claims. The usual practice is for the surety to pay the claim on the principal’s behalf and then be repaid by the principal. 

The surety will most likely initiate legal debt recovery procedures if the principal does not make full repayment in compliance with the surety’s credit terms.

The annual premium for a New York construction bond is the product of multiplying the bond amount by the premium rate assigned by the surety. The premium rate is based largely on the risk of the surety not being repaid for claims paid on the principal’s behalf. The standard measure of the risk of non-repayment is the principal’s personal credit score.

A high credit score is reliable evidence of a low risk to the surety, which merits a low premium rate. And a low credit score means the risk is greater, so the premium rate will be higher.

The premium rate for a contractor 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 New York construction bond.