Ohio 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 Ohio 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 an Ohio Construction Bond?

Construction project owners often have a great deal of money at stake. They rely on their chosen contractors to comply with all legal and contractual requirements, as violations can be very costly. Ohio construction bonds protect the owners of public works or private construction projects from the monetary losses that can occur when violations occur. Construction bonds require contractors to comply fully with applicable statutes and the terms of the construction contract and obligate them to compensate project owners for losses caused by noncompliance.

What Types of Ohio Construction Bonds May Be Needed?

In Ohio, there is no statewide licensing of contractors. However, contractors may be subject to local licensing laws that require them to furnish contractor license bonds to the specific licensing authority. 

Ohio’s “Little Miller Act,” the state’s version of the federal Miller Act, requires contractors awarded state-funded projects to furnish both performance bonds and payment bonds, each for 100% of the contract value. There is no minimum threshold contract value for these bonds to be mandatory. The statute also requires contractors in competitive bidding situations to provide a bid bond.

The Little Miller Act doesn’t apply to private construction projects. But, private project owners can also require contractors to provide bid, performance, and payment bonds. 

Other construction bonds that contractors operating in Ohio may need to purchase include:

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

How Does an Ohio Construction Bond Work?

Every construction bond is legally binding on its three parties, known as the bond’s:

  • obligee—the project owner,
  • principal—the contractor, and 
  • surety—the bond’s guarantor.

When a claim is received, the surety will determine whether it is valid. If it is, the contractor is legally obligated to pay it. Here’s where things get interesting. As the bond’s guarantor, the surety will pay a claim initially on the principal’s behalf. This ensures that the claim is resolved promptly and gives the principal some time to come up with the funds to cover the claim. The principal must repay the debt according to the surety’s credit terms or risk being sued by the surety to recover the money.

How Much Does It Cost?

Most construction bonds are subject to underwriting to establish the premium rate for the given bond applicant. The primary underwriting concern is the risk of the surety not being repaid for the credit extended in paying a claim on the principal’s behalf. The principal’s personal credit score is the accepted measure of that risk. 

A high credit score is evidence of financial responsibility, so the risk to the surety is low, and the premium rate will be low as well. Conversely, a low credit score is a strong indicator of 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 Ohio 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 an Ohio Construction Bond?

Construction project owners often have a great deal of money at stake. They rely on their chosen contractors to comply with all legal and contractual requirements, as violations can be very costly. Ohio construction bonds protect the owners of public works or private construction projects from the monetary losses that can occur when violations occur. Construction bonds require contractors to comply fully with applicable statutes and the terms of the construction contract and obligate them to compensate project owners for losses caused by noncompliance.

In Ohio, there is no statewide licensing of contractors. However, contractors may be subject to local licensing laws that require them to furnish contractor license bonds to the specific licensing authority. 

Ohio’s “Little Miller Act,” the state’s version of the federal Miller Act, requires contractors awarded state-funded projects to furnish both performance bonds and payment bonds, each for 100% of the contract value. There is no minimum threshold contract value for these bonds to be mandatory. The statute also requires contractors in competitive bidding situations to provide a bid bond.

The Little Miller Act doesn’t apply to private construction projects. But, private project owners can also require contractors to provide bid, performance, and payment bonds. 

Other construction bonds that contractors operating in Ohio may need to purchase include:

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

Every construction bond is legally binding on its three parties, known as the bond’s:

  • obligee—the project owner,
  • principal—the contractor, and 
  • surety—the bond’s guarantor.

When a claim is received, the surety will determine whether it is valid. If it is, the contractor is legally obligated to pay it. Here’s where things get interesting. As the bond’s guarantor, the surety will pay a claim initially on the principal’s behalf. This ensures that the claim is resolved promptly and gives the principal some time to come up with the funds to cover the claim. The principal must repay the debt according to the surety’s credit terms or risk being sued by the surety to recover the money.

Most construction bonds are subject to underwriting to establish the premium rate for the given bond applicant. The primary underwriting concern is the risk of the surety not being repaid for the credit extended in paying a claim on the principal’s behalf. The principal’s personal credit score is the accepted measure of that risk. 

A high credit score is evidence of financial responsibility, so the risk to the surety is low, and the premium rate will be low as well. Conversely, a low credit score is a strong indicator of 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 an Ohio construction bond.