South 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 South 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 South Carolina Construction Bond?

South Carolina construction bonds are designed to protect construction project owners against the financial harm that can result from a contractor’s unlawful or non-compliant actions. They fulfill this purpose by:

  1. requiring the contractor purchasing the bond (known as the bond’s “principal”) to operate in full compliance with all applicable statutory and contractual requirements and
  2. providing a source of funds for compensating the project owner (the bond’s “obligee”) or other injured party for monetary damages caused by the principal’s violation of the law or the terms and specifications contained in the construction contract.

What Types of South Carolina Construction Bonds May Be Needed?

In South Carolina, most contractors are licensed at the state level, which requires the purchase of a contractor license bond.

South Carolina’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for all public works projects, regardless of project size. There is a statutory requirement for these bonds to be in an amount equal to 100% of the contract value. 

Although private construction projects are not subject to South Carolina’s Little Miller Act, private project owners may require their contractors to furnish both performance and payment bonds, especially for higher value projects. While South Carolina’s Little Miller Act mandates bid bonds from contractors vying for a job through a competitive procurement process, private construction project owners have the option of requiring them as well.

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

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

How Does a South Carolina Construction Bond Work?

There are three parties to every construction bond agreement: the obligee, the principal, and a third party known as the “surety” (the bond’s guarantor). 

The surety has agreed to extend credit to the principal to fund the payment of claims the surety finds to be valid. To expedite the resolution of a claim, the surety will pay it on behalf of the principal. But, the legal obligation to pay belongs exclusively to the principal, who must then repay the resulting debt according to the surety’s credit terms. The surety is indemnified by the bond and will take legal debt recovery action if not repaid by the principal.

How Much Does It Cost?

Multiplying the bond amount by the premium rate yields the premium cost of a construction bond. The surety sets the premium rate for each bond based on the risk of not being repaid for claims paid on the principal’s behalf. That risk is measured using the principal’s personal credit score. 

A high credit score is correlated with low risk, which means the premium rate will be low. Similarly, a low credit score indicates higher risk, which calls for 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 South 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 South Carolina Construction Bond?

South Carolina construction bonds are designed to protect construction project owners against the financial harm that can result from a contractor’s unlawful or non-compliant actions. They fulfill this purpose by:

  1. requiring the contractor purchasing the bond (known as the bond’s “principal”) to operate in full compliance with all applicable statutory and contractual requirements and
  2. providing a source of funds for compensating the project owner (the bond’s “obligee”) or other injured party for monetary damages caused by the principal’s violation of the law or the terms and specifications contained in the construction contract.

In South Carolina, most contractors are licensed at the state level, which requires the purchase of a contractor license bond.

South Carolina’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for all public works projects, regardless of project size. There is a statutory requirement for these bonds to be in an amount equal to 100% of the contract value. 

Although private construction projects are not subject to South Carolina’s Little Miller Act, private project owners may require their contractors to furnish both performance and payment bonds, especially for higher value projects. While South Carolina’s Little Miller Act mandates bid bonds from contractors vying for a job through a competitive procurement process, private construction project owners have the option of requiring them as well.

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

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

There are three parties to every construction bond agreement: the obligee, the principal, and a third party known as the “surety” (the bond’s guarantor). 

The surety has agreed to extend credit to the principal to fund the payment of claims the surety finds to be valid. To expedite the resolution of a claim, the surety will pay it on behalf of the principal. But, the legal obligation to pay belongs exclusively to the principal, who must then repay the resulting debt according to the surety’s credit terms. The surety is indemnified by the bond and will take legal debt recovery action if not repaid by the principal.

Multiplying the bond amount by the premium rate yields the premium cost of a construction bond. The surety sets the premium rate for each bond based on the risk of not being repaid for claims paid on the principal’s behalf. That risk is measured using the principal’s personal credit score. 

A high credit score is correlated with low risk, which means the premium rate will be low. Similarly, a low credit score indicates higher risk, which calls for 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 a South Carolina construction bond.