Contractor Bond

Contractor Bond can be hard to understand sometimes, some companies have never heard of a bond until a client has expressed interest in obtaining one. We are sure you have questions about the advantages of bonding your company properly. Let one of our Contractor Specialist work to get you the information you need to make the best decision.

 

At Contractors 1st Insurance our certified brokers are working to make sure you receive you Contractor Bonds quick, easy and error free. We want to make sure that you understand the process of how a Contractor Bond works. The more knowledge you have about bonds that better prepared you are going to be when purchasing your Contractors Bond.

A Contractor Bond is a type of bond that involves 3 different parties. The first party is the consumer, the second party is the contractor, and the third party is the company writing the bond. Contractors Bond are used any time the contractor is expected to complete a project up to expectations and need further assurance of their compliance. When a contractor is bidding on a project, normally there is a concern if the contractor is able to do the work. A Contractor Bond is an assurance to the consumer that the project will be done and all vendors will be paid without any hardship to them if the contractor is unable to. Contractors that are bonded gain a competitive advantage in the area of consumer confidence. A Contractor Bond shows the consumer that you are financially able to obtain the bond and also you are looking out for the well being of their project.

Types of Contractor Bond

License Bonds

License bonds are types of bonds that are required before a company can obtain a license or permit for a construction project.  Almost every type of commercial or residential development or construction project requires the correct permit and licenses from state or local governments in order to complete the work.  A License bonds provides assurance that the contractor will obtain the required permits.

A license bond helps the client have a certain level of confidence that the contractor or company will perform the duties they were contracted to do.

Bid Bonds

A Bid Bond is a guarantee the contractor is able to complete the project once they are selected for the project. Having a Bid Bond assures the project owner that the contractor has the financial capabilities to complete the project effectively, and if the project fails they can collect the damages from the bonding company. A project owner that is requesting a Bid Bond is really requesting that the contractors don't receive any frivolous bids, because they will be required to do the job, or atleast pay the premiums.

Under the Miller Act, contractors bidding on government contracts are required to have a bid bond. Since this process acts so well, private companies are bring that practice into their process.

Performance Bonds

Performance Bonds makes sure that the project is completed to the expectations of the consumer. Normally they require that the contractor has collateral to back up the requirement of the binding company. A Performance Bond assures the consumer of the completion of the project and that they will not incur any additional cost. A Performance bond will cover 100% of the contract price and replace the bid bond once the contract is awarded.

Payment Bonds

A Payment Bond is a guarantee, normally 20% of the bid amount, submitted by the contractor that upon completion of the project all vendors will be paid on time and in full. If the fees of the vendors are not paid, the consumer could be confronted by the vendor or liens filed against the completed project. The consumer could end up paying more than the value of the work done.

For an immediate answer to a Contractor Insurance question, give us a call at 1-800-253-7040.