North Carolina 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 North Carolina 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 North Carolina Construction Bond?

North Carolina construction bonds protect construction project owners against financial losses caused by their contractors. They do this in two ways, by requiring contractors to:

  1. Comply fully with applicable statutes and all contractual obligations, and
  2. Compensate project owners for financial harm caused by contractor noncompliance

What Types of North Carolina Construction Bonds May Be Needed?

In North Carolina, general contractors are licensed at the state level, and those who don’t meet the state’s standards for financial responsibility must purchase a contractor license bond.

North Carolina’s “Little Miller Act” requires contractors to purchase both performance bonds and payment bonds in order to sign a contract for a state-funded project valued in excess of $300,000. Private project owners aren’t subject to the Little Miller Act, but they have the option to require performance and payment bonds to protect themselves and their investors if they have any. And both government and private project owners can impose a bid bond requirement on contractors competing for a construction job.

Other construction bonds that contractors in North Carolina may need include:

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

How Does a North Carolina Construction Bond Work?

The three parties to a North Carolina construction bond are:

  • The project owner requiring the bond (the bond’s obligee),
  • The contractor purchasing the bond (the principal), and
  • The bond’s guarantor (the surety).

The surety determines whether a particular claim is valid, and if it is, the principal is legally obligated to pay it. But the surety guarantees the payment of claims and, therefore, will pay a valid claim initially as an extension of credit to the principal. The principal must subsequently repay the debt in accordance with the surety’s credit terms. Not repaying the surety will almost always result in legal debt recovery action that could result in the principal having to pay court costs and legal fees on top of the debt owed to the surety.

How Much Does It Cost?

The annual premium for a North Carolina construction bond is calculated by multiplying the bond amount by the premium rate. While the bond amount is established by the obligee, the premium rate is assigned on a case-by-case basis by the surety through underwriting. The surety’s main concern is not being repaid for claims paid on the principal’s behalf. The accepted measure of that risk is the principal’s personal credit score.

A high credit score is the hallmark of a creditworthy individual, which means the risk to the surety is low. And low risk merits a low premium rate. A low credit score, however, means the risk is greater, which calls for a higher premium rate to offset it.

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 North Carolina 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 North Carolina Construction Bond?

North Carolina construction bonds protect construction project owners against financial losses caused by their contractors. They do this in two ways, by requiring contractors to:

  1. Comply fully with applicable statutes and all contractual obligations, and
  2. Compensate project owners for financial harm caused by contractor noncompliance

 

In North Carolina, general contractors are licensed at the state level, and those who don’t meet the state’s standards for financial responsibility must purchase a contractor license bond.

North Carolina’s “Little Miller Act” requires contractors to purchase both performance bonds and payment bonds in order to sign a contract for a state-funded project valued in excess of $300,000. Private project owners aren’t subject to the Little Miller Act, but they have the option to require performance and payment bonds to protect themselves and their investors if they have any. And both government and private project owners can impose a bid bond requirement on contractors competing for a construction job.

Other construction bonds that contractors in North Carolina may need include:

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

The three parties to a North Carolina construction bond are:

  • The project owner requiring the bond (the bond’s obligee),
  • The contractor purchasing the bond (the principal), and
  • The bond’s guarantor (the surety).

The surety determines whether a particular claim is valid, and if it is, the principal is legally obligated to pay it. But the surety guarantees the payment of claims and, therefore, will pay a valid claim initially as an extension of credit to the principal. The principal must subsequently repay the debt in accordance with the surety’s credit terms. Not repaying the surety will almost always result in legal debt recovery action that could result in the principal having to pay court costs and legal fees on top of the debt owed to the surety.

The annual premium for a North Carolina construction bond is calculated by multiplying the bond amount by the premium rate. While the bond amount is established by the obligee, the premium rate is assigned on a case-by-case basis by the surety through underwriting. The surety’s main concern is not being repaid for claims paid on the principal’s behalf. The accepted measure of that risk is the principal’s personal credit score.

A high credit score is the hallmark of a creditworthy individual, which means the risk to the surety is low. And low risk merits a low premium rate. A low credit score, however, means the risk is greater, which calls for a higher premium rate to offset it.

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

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