Indiana Performance and Payment 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 Indiana performance and payment 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 PERFORMANCE & PAYMENT BONDS QUOTE

What Are Indiana Performance & Payment Bonds?

Project owners can incur large losses when a contractor fails to complete a construction job in accordance with the terms of the contract and/or do not pay subcontractors and suppliers on time—or even pay them at all. 

A performance and payment bond protects a project owner (the “obligee” requiring the bond) through a combination of prevention and potential compensation. Specifically, the bond:

  • Legally obligates the contractor (the “principal” required to provide the bond) to abide by all applicable laws and regulations and the terms of the construction contract
  • Provides compensation when valid claims for damages are filed
  • Prevents mechanic’s liens on the property

Who Needs One?

Indiana’s “Little Miller Act,” the state’s version of the federal Miller Act, requires contractors to furnish performance and payment bonds for state-funded construction projects valued at more than $200,000. The state also has the option of requiring a performance bond for projects valued at $200,000 or less. The required bond amount for both performance and payment bonds is 100% of the contract value.

When both a performance and a payment bond are required, they are often combined in a single bond that provides the necessary protection. So the performance and payment bond for a $250,000 contract would provide $250,000 coverage for performance bond claims and $250,000 for payment bond claims. 

Today, it’s becoming more common for private project owners also to require performance and payment bonds from their contractors.

How Does a Performance & Payment Bond Work?

The third party to an Indiana performance and payment bond is the “surety,” the bond’s guarantor. The surety guarantees the payment of claims by agreeing to lend the principal funds, if necessary, to pay a claim. The principal bears the full obligation to pay valid claims, while the surety is indemnified against any legal responsibility for them.

When the surety determines that a claim is valid, the surety will pay it on behalf of the principal, which creates a debt the principal must pay back to the surety. Not repaying that debt will likely result in the principal being sued by the surety to recover the funds.

How Much Does It Cost?

The annual premium for an Indiana performance and payment bond is a small percentage of the required bond amount. That percentage is the premium rate, which is assigned on a case-by-case basis through underwriting. The main underwriting concern is the risk of the surety not being repaid for claims paid on the principal’s behalf, which is measured by the principal’s personal credit score.

A high credit score is an indicator of low risk, which deserves a low premium rate. A low credit score is a sure sign of higher risk, which warrants a higher premium rate. 

The premium rate for a well-qualified principal 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 Indiana performance and payment bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

 

CONTACT US FOR A

FREE PERFORMANCE & PAYMENT BOND QUOTE

What Are Indiana Performance & Payment Bonds?

Project owners can incur large losses when a contractor fails to complete a construction job in accordance with the terms of the contract and/or do not pay subcontractors and suppliers on time—or even pay them at all. 

A performance and payment bond protects a project owner (the “obligee” requiring the bond) through a combination of prevention and potential compensation. Specifically, the bond:

  • Legally obligates the contractor (the “principal” required to provide the bond) to abide by all applicable laws and regulations and the terms of the construction contract
  • Provides compensation when valid claims for damages are filed
  • Prevents mechanic’s liens on the property

 

Indiana’s “Little Miller Act,” the state’s version of the federal Miller Act, requires contractors to furnish performance and payment bonds for state-funded construction projects valued at more than $200,000. The state also has the option of requiring a performance bond for projects valued at $200,000 or less. The required bond amount for both performance and payment bonds is 100% of the contract value.

When both a performance and a payment bond are required, they are often combined in a single bond that provides the necessary protection. So the performance and payment bond for a $250,000 contract would provide $250,000 coverage for performance bond claims and $250,000 for payment bond claims. 

Today, it’s becoming more common for private project owners also to require performance and payment bonds from their contractors.

The third party to an Indiana performance and payment bond is the “surety,” the bond’s guarantor. The surety guarantees the payment of claims by agreeing to lend the principal funds, if necessary, to pay a claim. The principal bears the full obligation to pay valid claims, while the surety is indemnified against any legal responsibility for them.

When the surety determines that a claim is valid, the surety will pay it on behalf of the principal, which creates a debt the principal must pay back to the surety. Not repaying that debt will likely result in the principal being sued by the surety to recover the funds.

The annual premium for an Indiana performance and payment bond is a small percentage of the required bond amount. That percentage is the premium rate, which is assigned on a case-by-case basis through underwriting. The main underwriting concern is the risk of the surety not being repaid for claims paid on the principal’s behalf, which is measured by the principal’s personal credit score.

A high credit score is an indicator of low risk, which deserves a low premium rate. A low credit score is a sure sign of higher risk, which warrants a higher premium rate. 

The premium rate for a well-qualified principal 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 Indiana performance and payment bond.