Areaway Permit Bond

How Areaway Permit Bonds Work

If you run a contractor business and do public facing work, there is likely a time where you will need to secure an areaway permit bond. What is an areaway permit bond?

An areaway permit bond guarantees that the entity or person will comply with the laws and regulations of the state or city. This areaway permit bond is a type of permit bond and serves a similar purpose as an encroachment bond. In most cases, the areaway permit bond guarantees that the contractor will repair sidewalks, driveways, curbs, monuments, signs, meters, streetlights or any other structure that might have been damaged during the course of their work.

What is an Areaway Permit Bond?

Mistakes happen and if you work as a contractor on public spaces, it’s your job to fix any mistakes you make that lead to damage. This is where an areaway permit bond can really come in handy. An areaway permit bond is a form of financial security that provides protection for the municipality against any potential damages caused by a contractor or utility company while they are working in a public area. The bond guarantees that if any damage were to occur, the municipality would be compensated for it through the surety bonding company, which would then seek reimbursement from the business responsible.

The Cost of an Areaway Permit Bond

The cost of an areaway permit bond varies depending on the amount requested and the creditworthiness of the business applying for it. Generally speaking, most surety bonds cost between 1% and 15% of their total value. For example, if you’re seeking a $10,000 bond, you can expect it to cost anywhere from $100 to $1,500 annually.

The following factors can impact how much you’ll spend:

• The bonding capacity. The bonding capacity is the highest amount anyone can claim against an areaway permit bond. The amount your bond is worth (which may be the same as the bonding capacity or may be lower) will majorly affect how much you’ll spend as the rate you’re offered is applied to this amount.
• Your credit score. Your credit score is what will impact the rate you’re offered by a surety company the most when you purchase any type of bond. The higher your credit score is, the lower a percentage you’ll receive when you apply for an areaway permit bond. This is because a high credit score indicates that you’re likely to pay back your debts on time. So if a claim is filed against your areaway permit bond, having a high credit score shows the surety that you’ll be likely to pay them back. A high credit score also correlates with being less likely to have a claim filed against your areaway permit bond in general. Making an effort to improve your credit score before you apply for an areaway permit bond or before you go to renew one at the end of the bond term can save you a lot of money.
• Your business history. How established your business is and how financially stable your business is can also impact the rate you’re offered. The longer you’ve been in business, the more industry experience you have, and the stronger your business finances are, the more likely you are to be offered a favorable areaway permit bond rate.

Getting Approved for Your Areaway Permit Bond

The process for obtaining your areaway permit bond is relatively straightforward. All you need to do is fill out an application with your personal information and details about your project. Then you will need to provide proof of your financial stability—such as bank statements or tax returns—to demonstrate that you have enough money available to cover any potential damages in case something goes wrong during your work in the public area. Once all this information has been submitted and approved, you can qualify for an areaway permit bond and can choose to purchase it. Then you will receive your bond and be able to start work on your project.

The Takeaway

To recap—obtaining an Areaway permit bond is essential if you want access to public areas in order to carry out construction or repair work. An areaway permit bond guarantees that should anything go wrong during said activity, resulting in damage being done to any public property, the municipality will be compensated accordingly by way of the bonding company who issued said surety bond after being reimbursed by yourself or your business responsible for such activity.

While there may be costs associated with getting such a bond approved based on creditworthiness and other factors, it’s ultimately worth it in order to ensure that no one gets left paying costly fees due to careless behavior when conducting repairs or installations in public areas.