What is a surety bond? It is a contract reassuring an owner that a main contractor will perform predetermined duties as outlined in an agreement. Surety bonds are important to understand in order to assure that your contractor will complete their tasks in a timely manner, and pay any suppliers or laborers they use. These bonds come in 3 forms:
- Bid Bond: This type of bond gives you financial security by assuring the contractor will enter the contract at the price you have agreed upon, and will pay the necessary bonds.
- Performance Bond: This protects you in case your contractor breeches the contract.
- Payment Bond: This guarantees the contractor will compensate suppliers, workers, and subcontractors.
Surety bonds are beneficial because they shift the burden of risk from you to the surety company. The premium of bonds varies between companies. However, it is likely that the price will fall in between half of a percent and three percent. Surety companies have developed very thorough contractor prequalification standards to assess performance, which helps to protect owners even more by assuring the contractor is capable of completing the job well.
If you are in the construction business and need to purchase a surety bond, contact HR Solutions, located in Lakewood! They offer many forms of commercial insurance, including surety bonds!