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Grading Permit Bonds – Underwriting Considerations

Surety bonds for grading permits, offsite improvements and other, municipality required improvement bonds are different than the general performance and payment bond in several respects.  This type of bond is generally required by a municipality as part of a permit to improve private property.  The underwriting considerations of the surety company will include;

  1. How is the work being financed?
  2. Is the contractor performing the work qualified?
  3. What is the estimated completion time of the work?
  4. Do the principal(s),(the aprty requesting the bond) have good credit?

Once the bond has been provided, it is incumbent upon the principal to obtain the release of the bond from the obligee (the municipality requiring the bond).  Without a formal. written release, the surety company will bill every year for the bond and if necessary, invoke its rights under the indemnity agreement to collect the outstanding premium. the premium on this type of bod is usually 1% to 3% of the bond amount annually.



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