Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.
What Are They?
Alaska construction bonds help ensure the integrity of contractors operating within the state. They also provide some financial protection for licensing authorities, project owners, and the public against losses resulting from contractors’ noncompliance with state and local construction regulations or from construction contract violations. The injured party can file a claim for monetary damages.
Construction bonds are mandated by the state, by local government entities, or by public or private project owners. They are legally binding on all parties involved.
What Alaska Construction Bonds May Be Needed?
The most commonly required Alaska construction bonds include
- Contractor license bonds,
- Bid bonds,
- Performance bonds,
- Payment bonds,
- Maintenance bonds,
- Subdivision improvement bonds.
Other bonds, such as right of way bonds and solar decommissioning bonds, may be required depending on the project type and location.
How Do They Work?
There are three parties to every Alaska construction bond: the “obligee” requiring the bond, the “principal” (contractor) required to furnish a bond, and the “surety” guaranteeing the payment of claims.
The principal is legally obligated to pay all claims the surety finds valid, but the usual practice is for the surety to pay a claim initially on the principal’s behalf. That payment is, in fact, an extension of credit to the principal. The principal must repay the resulting debt to the surety or risk the surety taking legal action to recover the funds.
What Do They Cost?
The annual premium for any Alaska construction bond is a small percentage of the required bond amount. That percentage is the premium rate, which the surety assigns to each principal through underwriting.
The primary underwriting goal is to quantify the risk of the principal not repaying the surety for claims paid on the principal’s behalf. The most reliable measure of that risk is the principal’s personal credit score.
A high credit score is regarded as a sign of low risk to the surety, which deserves a low premium rate. A low credit score, on the other hand, signals higher risk and results in a higher premium rate.
A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.
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