Virginia 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 Virginia Construction Bonds?

In Virginia, as in other states, project owners can experience large financial losses when their contractors operate in an unlawful, unethical, or incompetent manner. Virginia construction bonds help prevent such losses in two ways: 

  • by requiring contractors to comply with the laws, regulations, and building codes governing Virginia’s construction industry, and
  • making sure that project owners can obtain compensation when contractors’ regulatory or contractual violations cause them financial harm.

What Virginia Construction Bonds May Be Needed?

Some commonly required construction bonds in Virginia are:

  • Bid bonds
  • Performance bonds
  • Payment bonds

Construction bonds may be required for publicly-funded projects at the state or local level, as well as by private project owners, particularly for larger projects. 

Other Virginia construction bonds that project owners may require include:

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

How Do Virginia Construction Bonds Work?

There are three parties to every Virginia construction bond—the obligee, the principal, and the surety—and the surety bond agreement is legally binding on all three.

  • The obligee is the party requiring the bond,
  • The principal is the contractor purchasing the bond, and 
  • The surety is the party guaranteeing the bond.

When a claim for damages is submitted, the surety determines whether it is valid. If it is, the principal is legally obligated to pay it. The surety will pay the claimant directly, drawing against a line of credit established for the principal when the bond was purchased. That payment creates a debt that the principal must repay to the principal within a certain time period. Failure to repay can result in the surety taking legal action against the principal.

How Much Do They Cost?

To arrive at the annual premium for a Virginia construction bond, the required bond amount established by the obligee is multiplied by the premium rate assigned to the principal by the surety through underwriting. The key question for the underwriters is whether a bond applicant is likely to repay the surety for the credit extended in paying a claim.

The risk of non-repayment is measured using the principal’s personal credit score. A high credit score means the risk to the surety is low, so the premium rate will also be low. A low credit score means higher risk and 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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