A paving surety bond is a contract entered into by three parties who agree in writing to undertake a paving project. This bond serves the purpose of ensuring that all the involved parties, that is, the surety company, the contract performer (called the principal) and the beneficiary (the obligee) adhere to the requirements of the contract and that the work is carried out within the agreed timelines.
One of the requirements that should be met by construction firms is that they should have proper bonding before they commence working. This contract eliminates any chance that the contract will not be executed as precisely as it should be. Should the principal default on their promise, the obligee can file a claim process with the surety company.
Why are paving bonds important?
It is a statutory requirement in many states that a contractor should have a construction bond before they can undertake any construction project, including a paving project. A paving bond helps parties to a contract mitigate risk. It lends a sense of credibility and trustworthiness to the contractor. People will often refuse to hire a company/contractor if they are not properly bonded. The best bonding agencies do not just sell bonds; they are experts at what they do and will be more than happy to take you through bonds of all kinds, including paving surety bonds. Call us for all your bonding needs. We bond with highly rated companies such as The Hanover Surety, The Hartford, CNA, and more.
Who needs a paving bond?
Paving contractors and other businesses engaged in construction work will need to procure this bond. Suppose you want to bid for a paving contract with your local county council. Typically, you are required to obtain a bond and submit documentation as part of the bidding process.
Why does the obligee need a paving bond?
The obligee understands the importance of working within the framework of a written contract. They want to be sure that the contractor will keep their end of the bargain. If the principal cannot complete the project for whatever reason, the surety company will have to pay the obligee the full amount of the value of the bond. This will help them hire a different contractor to finish up the work.
What is the cost?
It is an annual payment and the amount payable is not fixed. The type of surety required, the specific state that requires it, and the applicant’s credit score are a few of the factors that determine the price. The credit score is the most important factor in determining how much the bond will cost. Paving contractors with solid credit typically pay 0.75 percent – 2.5 percent of the bond amount while those with bad credit usually pay between 2.5 percent and 10 percent. We will discuss with you and agree on the best rate for your specific situation. These rates are constantly fluctuating, so you’ll need to call us to get a more accurate quote. Quotes are always free.
How can I lower my bond premium?
Improving your credit score is the most effective way to lower your bond premium. This may not always be possible but you can:
- Provide financial statements that show you can repay potential claims.
- Improve your personal or business liquidity by collecting on debtors. Demonstrate a strong financial capability.
- Showcase your level of experience on your resume and attach it to your application. More experienced applicants may pay less premium.
- Apply for a U.S. passport if you are not a citizen.
- Use the right bonding agency. Work with an agent who works with many surety companies because this ensures that you get the most competitive rates in the market. NFP is your one-stop-shop for paving bonds.
NFP is the industry leader in paving and construction bonds. Contact us at 800.863.3210 to request a free quote. We’re always happy take time to better understand your specific needs so that we can recommend the most suitable surety for your situation.
If you are uncertain about the type of bond you need, contact us today. We are an agency that works with several top-rated bond carriers, including Travelers Surety, Chubb Surety, and Western National Surety, that can offer you some of the most attractive rates in the bond market.