Idaho Payment Bonds

  • Home
  • Idaho Payment Bonds

Surety Bond Professionals is a family owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your performance bond needs.

What Are Idaho Payment Bonds?

If a contractor fails to pay subcontractors or suppliers, project owners could have their property encumbered by mechanic’s liens. With a payment bond in place, however, an unpaid subcontractor or supplier files a claim against the payment bond furnished by the contractor (known as the bond’s “principal”) for the financial protection of the project owner (the “obligee”). The principal is legally obligated to pay all valid claims filed by unpaid subcontractors or suppliers within a certain time period following project completion.

Who Needs Them?

Idaho’s “Little Miller Act,” officially called the Public Contracts Bond Act, is the state’s version of the federal Miller Act. It requires contractors to furnish a payment bond as a condition for being awarded a contract for any state-funded construction project, regardless of its size. The payment bond amount must be equal to 85% of the project value.

Privately funded construction projects aren’t subject to the Little Miller. However, private project owners have the option of requiring payment bonds from their contractors to protect the property against mechanic’s liens.

How Do Idaho Payment Bonds Work?

An Idaho payment bond is a legally binding contract among three parties: the obligee, the principal, and the bond’s guarantor (the “surety”). The surety guarantees the payment of valid claims by agreeing to extend credit to the principal for that purpose if necessary.

The standard practice is for the surety to confirm the validity of a claim and decide whether it must be paid. If the claim is valid, the surety will pay the claimant directly, using the line of credit set up for the principal when the payment bond was sold. The principal must repay the resulting debt according to the surety’s credit terms. Failing to do so will cause the surety to initiate legal debt recovery procedures.

How Much Do They Cost?

When you purchase an Idaho payment bond, you’ll pay a premium that is the result of multiplying the required bond amount by the premium rate. The surety assigns the premium rate to reflect the credit risk associated with guaranteeing the payment of claims on the principal’s behalf. Credit risk, the risk of the surety not being repaid for credit extended to the principal in paying a claim, is measured by the principal’s personal credit score.

A high credit score means the risk to the surety is low, which merits a low premium rate. A low credit score, on the other hand, calls for a higher premium rate to offset the greater credit risk.

A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.

Call Us Today

Our surety bond professionals will help you grow your revenue by maximizing your surety capacity. Call us today!