Utah 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 Utah 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 Utah Construction Bond?

Utah construction bonds protect construction project owners against the negative fiscal impact of a contractor’s statutory and/or contractual violations. Construction bonds:

  1. mandate contractor compliance with applicable laws and the terms and specifications of the construction contract, and
  2. provide a source of funds for compensating the project owner or other injured party for monetary losses caused by the contractor. 

What Types of Utah Construction Bonds May Be Needed?

Utah licenses general contractors at the state level. Contractors that fall short of the state’s financial responsibility standards may have to furnish a contractor license bond. Some municipalities license other types of contractors and may require the purchase of a contractor license bond. 

Utah’s “Little Miller Act,” the state’s version of the federal Miller Act, requires performance bonds and payment bonds for all state-funded projects, in an amount equal to the project’s value. The Little Miller Act does not apply to private construction projects, but private project owners may also choose to require performance and payment bonds from their contractors. Both state and local contracting entities and private project owners may make providing a bid bond a prerequisite for submitting a proposal or quote in a competitive bidding situation. 

Other construction bonds that contractors doing business in Utah may need to purchase include:

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

How Does a Utah Construction Bond Work?

The three parties to a Utah construction bond are the:

  • Project owner (the “obligee”),
  • Contractor (the “principal”), and
  • Guarantor (the “surety”)

The principal alone bears the legal obligation to pay valid claims. But, having guaranteed the payment of claims, the surety will pay a valid claim as an extension of credit to the principal. The principal must repay the resulting debt according to the surety’s credit terms. Failing to do so is likely to prompt the surety to initiate legal action to recover the funds.

How Much Does It Cost?

The premium a contractor will pay for a Utah construction bond is determined by multiplying the bond amount (established by the obligee) by the premium rate (set by the surety through underwriting). The main underwriting goal is to assess the risk of the surety not being repaid for claims paid on the principal’s behalf. The standard measure of that risk is the principal’s personal credit score. 

A principal with a high credit score is viewed as a low risk to the surety, so the premium rate will also be low. A lower credit score indicates a higher risk level, 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 Utah 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 Utah Construction Bond?

Utah construction bonds protect construction project owners against the negative fiscal impact of a contractor’s statutory and/or contractual violations. Construction bonds:

  1. mandate contractor compliance with applicable laws and the terms and specifications of the construction contract, and
  2. provide a source of funds for compensating the project owner or other injured party for monetary losses caused by the contractor. 

Utah licenses general contractors at the state level. Contractors that fall short of the state’s financial responsibility standards may have to furnish a contractor license bond. Some municipalities license other types of contractors and may require the purchase of a contractor license bond. 

Utah’s “Little Miller Act,” the state’s version of the federal Miller Act, requires performance bonds and payment bonds for all state-funded projects, in an amount equal to the project’s value. The Little Miller Act does not apply to private construction projects, but private project owners may also choose to require performance and payment bonds from their contractors. Both state and local contracting entities and private project owners may make providing a bid bond a prerequisite for submitting a proposal or quote in a competitive bidding situation. 

Other construction bonds that contractors doing business in Utah may need to purchase include:

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

The three parties to a Utah construction bond are the:

  • Project owner (the “obligee”),
  • Contractor (the “principal”), and
  • Guarantor (the “surety”)

The principal alone bears the legal obligation to pay valid claims. But, having guaranteed the payment of claims, the surety will pay a valid claim as an extension of credit to the principal. The principal must repay the resulting debt according to the surety’s credit terms. Failing to do so is likely to prompt the surety to initiate legal action to recover the funds.

The premium a contractor will pay for a Utah construction bond is determined by multiplying the bond amount (established by the obligee) by the premium rate (set by the surety through underwriting). The main underwriting goal is to assess the risk of the surety not being repaid for claims paid on the principal’s behalf. The standard measure of that risk is the principal’s personal credit score. 

A principal with a high credit score is viewed as a low risk to the surety, so the premium rate will also be low. A lower credit score indicates a higher risk level, 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 Utah construction bond.