The industry offers a large variety of surety bonds, which are required to bid or work on all public works projects, private construction, remodeling, and new construction.
The different types of surety bonds include bid bonds, performance (contract) bonds, and payment bonds. These bonds offer protection for the project owner, taxpayers, investors, etc., associated with private projects. Typically, projects need all three bonds.
Bid Bonds
These bonds guarantee that the contractor will accept a job if they win the bid. They are required by federal law on all projects over $100,000. State-sponsored public work projects also usually require bid bonds. If the winning contractor decides not to accept the job, the project owner is able to submit a claim to cover costs linked to evaluating new contractor bonds.
Performance Bonds
Sometimes called contract bonds, they guarantee that the contractor will fulfill the entire project, abiding by laws and industry standards. If they fail to do so, the project owner can file a claim to recover any financial loss resulting from another contractor re-doing the work.
Payment Bonds
These bonds guarantee that the contractor will pay if the work is not completed in accordance with the terms of the contract by the workers, subcontractors, or suppliers. A claim by any of the aforementioned parties can result if the contractor fails to remit payment.
Contractor License Bonds
The only type of construction bond that is not project-specific; they don’t apply to a single project. These bonds guarantee that the contractor will conduct business in a lawful and ethical manner, meeting industry standards. Some states require all contractors to be licensed at the state level to operate legally.
In terms of cost, the contractor usually pays only a small percentage of the required bond amount established by the project owner or licensing authority. A surety bond company establishes a premium rate for each applicant based on their personal credit score, industry experience, and personal/business financial statements. Those in good standing usually pay one- to three percent of the total bond amount as an annual premium.
Construction Bonding Specialists is a leader in obtaining construction surety bonds. We can assist you in winning more jobs through bond terms. Contact us today to learn more.
At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.
Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/