Utah Construction 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 construction bond needs.


What Are Utah Construction Bonds?

Utah construction bonds are designed to prevent project owners from experiencing financial losses when their contractors violate state or local regulations or building codes or otherwise don’t live up to the terms of a construction contract. Construction bonds require contractors to operate lawfully and ethically and provide a way for project owners to be compensated for monetary damages in the event of violations.

What Utah Construction Bonds May Be Needed?

Some commonly required construction bonds in Utah are:

  • Bid bonds
  • Performance bonds
  • Payment bonds

These construction bonds may be required by public or private project owners, particularly for larger projects. Other Utah construction bonds that contractors may need to purchase include:

  • Contractor license bonds (local only)
  • Maintenance bonds
  • Subdivision improvement bonds
  • Solar decommissioning bonds
  • Right of Way bonds

How Do Utah Construction Bonds Work?

A Utah construction bond is a legally binding contract among three parties known as the obligee, the principal, and the surety.

  • The obligee is the party requiring the bond,
  • The principal is the contractor purchasing the bond, and 
  • The surety is the bond’s guarantor.

The principal bears the full legal obligation to pay valid claims. But as the bond’s guarantor, the surety agrees to extend credit to the principal, if necessary, for the purpose of paying a valid claim. The normal practice is for the surety to pay the claimant directly and then be repaid by the principal. Failing to repay the debt on time can result in the surety initiating legal action to recover the funds. 

How Much Do They Cost?

The annual premium for a Utah construction bond is calculated by multiplying the required bond amount (established by the obligee) by the premium rate (set by the surety) through underwriting. The main underwriting concern is the risk that the principal won’t repay the surety for the credit extended when paying claims on behalf of the principal. The metric used in the risk assessment is the principal’s personal credit score. 

A high personal credit score is a reliable indicator of low risk to the surety, so the premium rate will be low as well. A low credit score indicates greater risk, which 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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