Sewer and septic tank bonds are legally binding agreements between three parties: contractors working on sewers and septic tanks, the government agency responsible for regulating work on local sewer systems, and a surety company.
The government agency is the Obligee and establishes the obligations that the contractor (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the contractor.
Sewer bonds are required in some states for eligibility to obtain a license to install or repair sanitary sewer systems, septic tanks, manholes, or pump stations. The bonds help protect the general public by ensuring proper construction and installation.
Some states that require a surety bond include Georgia, Maryland, and Tennessee. Most states handle licensing directly while some allow local municipalities to handle licensing and regulations.
When the surety company issues the bond, they provide the government agency a guarantee that they will receive payment for financial losses resulting from a violation of the statutes and regulations set forth by the sewer contractor's license.
If the contractor fails to meet the obligations set out by the government agency, the surety will pay out any damages up to the bond amount. The contractor is ultimately liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
Sewer surety bond costs vary depending on the total bond amount and the premium rate. The government agency sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for sewer bonds typically cost between 1% and 5% of the total bond amount. Sewer bonds may require credit checks but it is ultimately the surety company's decision how to underwrite the bond.
During the application process, the surety company evaluates your financial strength and industry experience. For bonds requiring credit checks, applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a sewer bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.
Below are the lowest premiums EZ Surety has issued for sewer surety bonds in popular states.