When a building is under construction, the building owner expects that the contractor doing the work will complete the project on time and within the budget. In some circumstances, this may not happen and this is why contract bonds are issued to a contractor, to give the building owner peace of mind.
When corporate surety issues a bond, underwriters look at the three C’s for a contractor: character, capacity and credit. A successful contractor embodies these three characteristics. These are five types of bonds commonly used to secure construction projects:
- Bid or Proposal Bonds: The contractor presents a bid bond along with their bid. The bid bond ensures that if the contractor is awarded the job, they will enter into the contract and the contractor will furnish all necessary performance and payment bonds to the owner.
- Performance Bonds: This type of bonds guarantees that a project will be completed in accordance with the contract specifications.
- Payment Bonds: These bonds guarantee that subcontractors and certain material suppliers on the project will be paid.
- Maintenance Bonds: These bonds require that the contractor agree to remedy any defects for a specified period of time after the project is complete.
- Completion Bonds: These bonds are issued to guarantee satisfactory completion of a project by a contractor.
AssuredPartners NL’s team of construction and surety experts have the knowledge and tools to help navigate the requirements and determine the best risk solution for your company. To learn more, visit AssuredPartners NL Construction.
Source: PropertyCasualty360Share This: