Bonding in Connecticut

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, subcontractor, or a government body (the obligee) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the bond face value. The contractor then owes the surety for what the surety paid out. A bond protects the public. It is not insurance for the contractor. Connecticut distinguishes between license-level compliance (typically insurance and participation in the Home Improvement Guaranty Fund) and project-level bonding on public and large private work. Keep these Connecticut-specific bond contexts separate. 1. Home Improvement Contractor (HIC) and New Home Construction Contractor (NHC): Guaranty Fund, not a surety bond. Connecticut HIC registration under C.G.S. §20-421 and NHC registration under C.G.S. §20-417a do not require a surety bond. Registrants contribute to the Home Improvement Guaranty Fund or the New Home Construction Guaranty Fund under C.G.S. §20-432 and §20-417g, which pay consumer claims against registered contractors up to statutory caps. Registrants must also maintain commercial general liability insurance and comply with written-contract disclosure rules. Source: Connecticut DCP Home Improvement Contractor (https://portal.ct.gov/DCP/License-Services-Division/License-Division/Home-Improvement-Contractor-Registration). 2. Public works: Connecticut Little Miller Act at C.G.S. §49-41 through §49-43. Connecticut's Little Miller Act requires performance and payment bonds on public-construction contracts. Under C.G.S. §49-41, a contractor awarded a contract with the state or a political subdivision above $100,000 (or above $25,000 for certain municipal contracts; check the specific statute and solicitation) must furnish a payment bond for 100% of the contract price before beginning work. Many solicitations also require a performance bond for 100% of the contract price. The payment bond protects subcontractors and suppliers under the statutory notice procedures at §49-42. Subcontractors on bonded public jobs perfect claims against the payment bond; a mechanic's lien generally cannot attach to public property. Source: C.G.S. Chapter 847 §§49-41 through 49-43 (https://www.cga.ct.gov/current/pub/chap_847.htm). 3. Connecticut Department of Transportation bonds. CTDOT construction contracts require bid, performance, and payment bonds under the CTDOT Standard Specifications for Roads, Bridges, Facilities, and Incidental Construction. Performance and payment bonds on CTDOT contracts are typically 100% of the contract price. Source: Connecticut Department of Transportation (https://portal.ct.gov/DOT). 4. Private construction: mechanic's lien. On private Connecticut projects, subcontractors and suppliers rely on the mechanic's-lien procedure at C.G.S. §49-33 rather than a contractor license bond. An owner may post a bond to discharge a lien under C.G.S. §49-37; this is a project-specific lien tool, not a license bond. Source: C.G.S. Chapter 847 (https://www.cga.ct.gov/current/pub/chap_847.htm). 5. Workers' compensation self-insurance. An employer that elects to self-insure for workers' compensation under C.G.S. §31-284 must file security with the Workers' Compensation Commission, which may include a surety bond. Standard practice is to carry workers' compensation through a licensed carrier; self-insurance is reserved for very large employers. Source: Connecticut Workers' Compensation Commission (https://portal.ct.gov/wcc). Premium math. A surety charges an annual premium, typically 1% to 3% of the bond face value for a contractor with strong credit and no prior claims. Weaker credit, tax liens, prior surety losses, or a new business can push the rate to 5% to 10% or more. Project performance and payment bonds on Connecticut public-works contracts are priced per job, usually 0.5% to 3% of the contract price. Bond, insurance, and workers' compensation are separate requirements. A Connecticut contractor typically carries general-liability insurance appropriate to the trade, commercial auto, and workers' compensation under C.G.S. Chapter 568. Bonding is a per-project requirement on public work and specific private contracts. Verify each requirement against the current statute and the contract before you assume you are compliant.