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What is a right of way bond?
A right of way bond, also called a ROW bond, is a type of license and permit bond that guarantees the performance of work in a publicly owned right of way. ROW bonds are typically required before obtaining a permit or starting any work, whether that be on or involving the public right of way. License and permit bonds ensure contractors follow applicable regulations and guidelines pertaining to their industry.
What is a publicly owned right of way?
A right of way refers to any type of public property that allows one or more persons to use to reach another location. This can also be a private property where a public service must be stored or installed. These properties could include sidewalks, public parking lots, power line systems, sewage or water pipes, etc. Often, the work performed by a contractor will be an installation, maintenance or removal of some associated public system.
These right of ways might not be completely open to the entire public. Some ROWs might be only for specific people or open to none except maintenance personnel.
Why is a ROW bond required?
ROW bonds are required as a form of consumer protection. In the event a consumer faces damages or is harmed by any negligent actions, the consumer can file a claim up to the bond’s full amount. The surety company will determine the validity of the claim and if found valid, provide funds to cover the claim. The principal (bondholder) is then required to pay the surety back for all funds paid out.
In addition, these bonds guarantee the proper maintenance or work be done in a timely manner on right of ways within the parameters of any applicable ordinances and the permit. Submit a bond applicaton today to get started towards obtaining that guarantee!
How do ROW bonds work?
Any surety bond is an agreement between three parties: the obligee, the principal and the surety. The obligee is the government entity that requires a surety bond. The principal is the individual or company that must obtain and post the surety bond. The surety is the surety bond company that issues the bond.
Per the agreement entered into when a bond is obtained, consumers are protected from any negligent or damaging consequences that result from the principal. If a consumer files a claim against the principal, the surety would pay the consumer up to the full bond amount. The principal must then pay the surety back in full for any funds paid out.
The bond guarantees to the obligee that the principal will follow all guidelines and terms established by the bond and the city, county or state they are working in.
Right of Way Bonds by State
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How much does a ROW bond cost?
These bonds are often required at the city or county level before obtaining a permit, Right of way bonds can typically be issued instantly online for a set premium. However, some may still require underwriting consideration.
Instant Issue ROW bonds
If a ROW bond can be issued instantly online, it is typically for a set percentage of the bond amount. For example, a Kent County, Michigan right of way bond is issued in the amount of $20,000 and costs $200, just 1% of the total bond amount.
Some instant issue bonds might be issued for a set premium that is not a direct percentage of the bond amount. The city of Chardon, Ohio, for example, requires a $5,000 ROW bond that can be issued for a $100 set premium.
Some instant issue bonds may offer a 25% multi-year discount. A $10,000 Rocky Hill, Connecticut ROW bond is typically issued for $100 for a one-year term. However, the 25% multi-year discount means this bond for a two-year term would cost $175.
Underwritten ROW bonds
ROW bonds can be underwritten for a variety of reasons. The bond could have a varying amount, there could be a history of claims against that bond or the bond amount could be large. Regardless of the reason, these bonds will all go through the same underwriting process.
Before a quote can be issued on an underwritten bond, an underwriter must review the bond application, applicant’s credit, and/or financial history. These will be used to determine the price an applicant will pay for a ROW bond. If approved, all applicants will not be approved at the same rate. The rate will vary as all applicants do not have the same credit, financial history and/or bond they are applying for.
If the bond is underwritten, the best way to determine the exact price for a ROW bond is to submit an application for your free no obligation bond quote.
How to get a right of way permit
Cities often have specific requirements before applicants can obtain a right of way permit. However, there are a few typically requirements of those wanting to work in the right of way.
- Complete a permit application (Include required information detailing the work to be conducted)
- Submit the associated permit fee
- Obtain or indicate possession of the required contractor license
- Post the required right of way (ROW) bond
Double-checking with the obligee ensures all required materials for obtaining a right of way permit are submitted.