Indiana Bid Bonds

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 bid bond needs.

What Are Indiana Bid Bonds?

Indiana bid bonds provide financial protection for owners of public or private construction projects. A bid bond serves as the bidding contractor’s guarantee that:

  • The bid price is accurate,
  • The contractor is able to furnish any required performance and payment bonds if chosen as the winning bidder, and
  • The contractor will accept the job and enter into a contract if chosen as the winning bidder. 

In the event of the contractor’s failure to live up to that guarantee, the project owner can file a claim for any monetary damages. 

Who Needs Them?

State contracting authorities, such as the Indiana Department of Transportation that select contractors for public works projects through competitive bidding may require bidders to provide a bid bond. A bid bond requirement is common for projects valued at more than $100,000. Local contracting authorities may also require bid bonds. In most cases, the bid bond amount must be at least 5% of the bid price, and private project owners can also mandate bid bonds for their construction projects.

How Do Indiana Bid Bonds Work?

An Indiana bid bond is a legally binding agreement between the contracting authority (the bond’s “obligee”), the contractor (known as the “principal,” and the bond’s guarantor (the “surety”). The principal is legally obligated to pay any valid claim, but the surety guarantees that the principal will pay.   

Because of that guarantee, the surety will pay the claimant directly to expedite the resolution of the claim. This payment is essentially a loan to the principal, who must repay the debt according to the surety’s credit terms. Not being repaid usually will result in the surety taking legal action to recover the debt owed by the principal.  

How Much Do They Cost?

To obtain a bid bond, the principal pays a premium that is the product of multiplying the bond amount set by the obligee by the premium rate assigned by the surety. That premium rate will reflect the underwriting assessment of the risk to the surety—primarily the risk of not being repaid for claims paid on behalf of the principal. 

The principal’s creditworthiness is the metric for measuring the risk of nonrepayment. A high personal credit score means low risk, which earns the principal a low premium rate. A low credit score means the risk to the surety is higher, which warrants 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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