California Payment Bonds

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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 California payment bond needs.

What Are They?

California payment bonds are mandated by California’s “Little Miller Act,” the state’s version of the federal Miller Act. They are a type of contractor bond that guarantees payment of subcontractors, suppliers, and laborers working on public projects paid for by California taxpayers.

They provide financial protection for people who provide labor or supplies directly to a general contractor or through a subcontractor. In purchasing a California payment bond, a general contractor is guaranteeing to pay suppliers, subcontractors, and laborers according to the terms of the project contract. Failure to do so can result in claims for compensation being filed against the contractor’s California payment bond.

Who Needs Them?

California’s Little Miller Act requires contractors awarded projects valued at $25,000 or more to purchase a payment bond.  Private project owners may also require contractors to purchase California payment bonds to offer payment protection to subs and suppliers, and to potentially prevent liens on their property.

Speak with a Surety Bond Professionals agent today to discuss your bonding needs.

How Do They Work?

A signed surety bond agreement is a legally binding contract among three parties:

  • The project owner requiring the bond is referred to as the “obligee.”
  • The contractor required to purchase the payment bond is called the “principal.”
  • The bonding company that underwrites and issues the bond is known as the “surety.”

In selling a California payment bond, the surety is agreeing to extend the principal credit in an amount equal to the required bond amount, or penal sum. This guarantees that money will be available to pay valid claims filed against the bond.

If the surety’s investigation finds the claim to be valid, the surety will go ahead and pay it against the credit line established for the principal. This creates a debt that the principal owes to the surety and is legally obligated to repay, as an indemnification clause in the bond agreement conditions reimbursement for the payment of claims.

What Do They Cost?

California payment bonds are sold for a premium that is a small percentage of the bond’s penal sum. The specific percentage, or premium rate, for a given principal depends on the principal’s personal credit score and company’s financial capacity and is determined through the surety’s underwriting process.

The surety has two main concerns: the likelihood that claims will be filed in the first place and the risk that the principal will not repay credit extended to pay claims. So, in addition to looking at the principal’s credit score, the underwriters also consider the principal’s general financial strength and industry experience.

In most cases, the premium rate for a California payment bond will be in the range of 1% to 3%.

Get a Quote

Our surety bond professionals will get you the California payment bond you need at a competitive rate.