Most General Contractors don’t realize what a Contractor Bond is until a client has expressed an interest in obtaining one. Contractors Bond involve 3 different parties. The first is the client, the second is the General Contractor, and the third is the bonding company.
Contractors Bond act as a guarantee to the client from the General Contractor that the project will be finished up to expectations. If the project is not finished up to expectations of the client the Contractor Bond will off set the financial cost the client has incurred to finish or fix the project.
Private companies are now expecting General Contractors to have a Contractor Bond in order to do business with them or even bid on the project. All government contract work requires that Contractors meet certain bonding requirements.
A Contractor Bond is the assurance to the client that the project will be done and all vendors will be paid without any financial loss to the client. Having a Contractors Bond shows clients that you are financially able to obtain the bond and also you are looking out for their best interest.
Types of Contractors Bond
Bid Bonds
Bid bonds are Contractors Bond used as a security for bids submitted on a contract proposal. In larger developments bid bonds are required for all bids or the bids will be rejected. The bid bond gives the client the confidence that the Contractors stand behind their work. With a bid bond if the lowest bid Contractor is given the project and backs out, the client will receive the financial difference between the lowest bid and the next lowest bid.
Performance Bonds
Performance Bonds ensure that the Contractor will complete the project with quality work. In the event that the Contractor does not complete the project up to expectations, the Performance Bond prevents financial loss for the client.
Payment Bonds
Payment bonds makes sure that laborers, suppliers, and sub contractors get paid in the event of the contractor defaulting. Payment bonds are required in projects over $30,000 with the Federal Government and must be 100% of the contract value.
For an immediate answer to a General Contractor Insurance question, give us a call at 1-800-329-2040.