Surety Bonds Maryland

Bid, Performance, Payment, License & Court Bonds for Contractors & Businesses

Work With Us To Provide a Solid Guarantee that the Contract Will Be Fulfilled

Call Insurance Brokers of Maryland for the Best Rates on Surety Bonds

Before a general contractor can bid on a public job . . . before a home improvement contractor can register with the state . . . before an estate can be settled in court . . . someone asks for a bond.

That’s where Insurance Brokers of Maryland comes in.

A surety bond is a financial guarantee that a business or individual will do what a contract, a license, or a court order requires. Insurance Brokers of Maryland places bonds and business insurance for contractors in Maryland from our office in Frederick, serving Frederick County, Washington County, Montgomery County, Hagerstown, Baltimore, and the rest of the state.

As independent brokers, we compare surety markets and insurance carriers instead of selling for one company, so you get both bonding and insurance in force with the markets that best fit your credit, scope of work, and budget. Call, click, or visit our office; we’ll offer free quotes to satisfy both your bonding needs and insurance needs.

What Is a Surety Bond and How Does It Work?

A Three-Party Agreement That Protects the Public, Your Clients, and the Government

A surety bond is a legally binding three-party agreement that guarantees compliance with a rule or performance of a task. The principal is the individual or business purchasing the bond. The obligee is the entity that requires the bond to protect the public interest, which could be a state agency, a municipality, a project owner, or a court. The surety is the insurance or bonding company that financially backs the principal.

In contrast to an insurance policy, which provides coverage for the business that buys it, bonding does not protect the principal. A surety bond protects the public, clients, or a government entity against financial loss. If the principal fails to perform, a claim can be filed against the bond by the obligee or an injured consumer. If the claim is valid, the surety pays out compensation to resolve the damage, and the principal must legally repay the surety for any claims paid under the indemnity agreement signed with the application. That repayment obligation is why surety issuers review credit, financial statements, and work history before approval.

Which Surety Bonds Do Maryland Contractors and Businesses Need?

Contract Bonds, License and Permit Bonds, and Court Bonds Cover Most Situations

There are various classes of surety bonds, including license and permit bonds, contract bonds, and court bonds. Contractors in Maryland can run into all three. Insurance Brokers of Maryland helps obtain these different types of bonds for general contractors, subcontractors, home improvement contractors, dealers, and business owners:

• Bid, performance, and payment bonds: contract bonds that guarantee a general contractor or subcontractor fulfills the obligations of a project contract and that suppliers get paid. Surety bonds guarantee reimbursement if contractors fail to meet contract terms, which is why owners require them on construction projects of every size.

• Supply and service contract bonds for contractors and vendors delivering materials or ongoing services to public buyers.

• Subdivision and site improvement bonds that guarantee a developer completes the streets, sidewalks, and utilities a county or city requires.

• License and permit bonds, required by state or local governments for specific businesses, including motor vehicle dealers, contractors bidding public work, and many licensed trades.

• Court bonds such as probate, guardian, and appeal bonds, required in legal proceedings to protect parties from financial loss.

Applicants for a Maryland Home Improvement Commission (MHIC) license must show financial solvency, and an applicant who doesn’t meet the Commission’s solvency guidelines may purchase a surety bond instead. Any general contractor bidding on state work should know that Maryland follows rules similar to the federal Little Miller Act: Performance and payment bonds are required on state public works contracts above the statutory threshold, typically $100,000. Contractors in Maryland must obtain surety bonds for certain projects at the county and city level as well, so it’s advisable to learn what each obligee requires before the bid opportunity closes.

How Much Does a Surety Bond Cost in Maryland?

A Small Percentage of the Bond Amount, Priced on Your Credit and Financial Strength

The premium for a surety bond is a small percentage of the total bond amount: typically 1% to 3% for well-qualified applicants and up to 10% for weaker credit. For example, a $100,000 performance bond works out to roughly $1,000 to $3,000 for contractors with clean credit and solid financial statements. Strong credit often yields lower rates, so the same guarantee costs several times more for a business with past judgments or thin working capital, and the savings from cleaning up credit before you apply can be significant. Note that the premium you pay is separate from your insurance coverage costs.

Several factors influence the rate: Personal and business credit, financial statements, years in business, the size of the job, and the contractor’s track record. Small business owners and any general contractor new to bonding often start with license and permit bonds, and grow into a larger bonding program over time.

Insurance Brokers of Maryland helps contractors large and small purchase the surety bonds they need. Our team brings both underwriting and agency experience to every application, along with the expert financial analysis needed to help you grow your bonding program. As an independent brokerage with access to a large number of surety markets, we can find solutions for even the most unusual bond situations.

Who Requires Surety Bonds in Maryland?

State Agencies, Counties, Cities, Project Owners, Lenders, and Courts

Surety bonds are commonly required for business licenses in regulated industries in Maryland. The MHIC, the Maryland MVA for motor vehicle dealers, county permit offices, and public works departments in Frederick County, Washington County, Montgomery County, and Baltimore County all ask contractors and dealers for bonding before issuing a license or awarding a contract. Private project owners and general contractors require performance and payment bonds from subcontractors under them, and lenders often require bonds on financed construction projects. Courts require probate, guardian, and appeal bonds before allowing someone to manage another person’s assets.

Getting bonded is straightforward for contractors in Maryland. Submit a short application and, for larger contract bonds, business and personal financial statements as well. Your Insurance Brokers of Maryland agent will review the details, match the request with the surety market most likely to approve it, and provide the form the obligee needs, along with quotes for insurance coverages the contract requires.

What Insurance Do Maryland Contractors Need Alongside a Bond?

Contractor Insurance Requirements in Maryland Go Beyond Bonding

A bond satisfies the obligee, but it doesn’t cover the contractor’s own losses. Contractors in Maryland need a separate contractor insurance program to comply with state laws regarding business insurance requirements. Contractors are obligated to carry the insurance coverage a project owner or licensing office demands, which is in place to protect the business, its employees, and its equipment.

For truly comprehensive coverage for your contracting business, the core insurance policies needed are:

• General liability insurance covers bodily injury to clients and property damage caused by your work, including medical bills and legal fees if you are sued. Project owners and permit offices expect every general contractor to carry general liability insurance in Maryland, and state law requires licensed home improvement contractors to carry at least $500,000 in general liability coverage. Many project owners ask for higher per occurrence limits, and a commercial umbrella policy adds liability insurance above the base policy when a lawsuit exceeds it.

• Workers compensation insurance is legally required for contractors with one or more employees. The coverage pays medical bills and lost wages for workers injured on the job and protects the business from an employee lawsuit over injuries. See our page on workers compensation insurance for Maryland employers.

• Commercial auto insurance covers business vehicles in accidents, and Maryland requires liability coverage on every registered vehicle. Personal auto insurance policies typically exclude work use, so contractors hauling tools, equipment, or materials to job sites need commercial liability and physical damage coverage. Learn more about commercial auto insurance for Maryland contractors.

• Builders risk insurance protects buildings under construction from damage by fire, windstorms and other natural disasters, theft, and vandalism. Owners and lenders often require this coverage on construction projects in Maryland. Learn more about builders risk insurance for Maryland projects.

• Inland marine insurance, also called tools and equipment coverage, covers loss or damage to contractor tools, power tools, hand tools, and equipment on the job site, in a trailer, or stolen from a truck overnight. Commercial property insurance covers the shop or office itself, and other policies such as cyber and pollution coverage can be added.

Insurance requirements for contractors in Maryland also depend on where the work is. Maryland does not issue one statewide general contractor license for every kind of construction; home improvement work is licensed through the MHIC, and counties and cities set their own permit rules, so a general contractor working in Frederick may face different insurance coverage requirements than one working in Baltimore.

Before a general contractor license, permit, or MHIC registration is approved, the licensing office usually wants proof of liability insurance on file. Additionally, project owners may require certain insurance coverages in the contract, such as higher limits or an additional insured endorsement. At Insurance Brokers of Maryland, we review each set of requirements to ensure your existing policies are in compliance, so nothing is missing when the bid comes due.

Talk With Insurance Brokers of Maryland About Surety Bonds and Contractor Insurance

Just One Call for Bonding, Liability Insurance, Workers Compensation Insurance, and Commercial Auto Insurance

Insurance Brokers of Maryland helps contractors in Maryland and business owners across Frederick, Hagerstown, Baltimore, and the rest of the state secure the essential bonds and insurance coverage their work requires. Because we compare multiple carriers and surety markets, you get quotes for your bonds and for the full contractor insurance program from one broker instead of chasing separate agents, whether you’re a general contractor, a subcontractor, a dealer, or a small business that needs a single license bond.

Find the best coverage at the best rates. That’s what Insurance Brokers of Maryland does for Maryland businesses every day.

Call 301-668-2233, visit one of our offices at 182 Thomas Johnson Drive in Frederick or at 600 East Main Street in Emmitsburg, or contact us online to request bond and small business insurance quotes. You can also review the business insurance options we offer Frederick and Maryland companies and get every policy taken care of by one agency, with the peace of mind that comes from knowing the bonding and the insurance were designed to work together.

When You Need Surety Bonds, Maryland Businesses Work with Insurance Brokers of Maryland