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Construction bonds play a vital role in any construction project. A bid bond is a written assurance from the third party guarantor (generally a bank or an insurance firm) who submits to the customer (otherwise known as the principal) the obligation by the bidder (the contractor) of a submitted bid. It is to make sure that the contractor will enter into a contract, proceed with the contract and will replace the bid bond with a performance bond.
Per law, all bidders are required to submit bid bonds on federal projects. If a construction company wants to have a competitive edge in the industry, it is vital for them to compete for larger projects that require a bid. The bid bond process helps to eliminate unqualified bidders and is necessary for the process of competitive bidding.
A performance bond guarantees faithful performance and completion of a construction project. The critical condition is the need for collateral property or investment to back up the requirements of the surety agency. A performance bond is usually issued by a bank or an insurance company, and the duo act as the “surety.”
A maintenance bond confirms that a contractor will settle any sort of defects or, if they do not, they will then be responsible for compensating the owner for those defects. It is a guarantee against loss due to defective workmanship or materials used in the completion of a construction project.
A payment bond is a three-way contract between the owner (principal), the contractor (obligee) and the surety. It confirms payment for labor and materials used for the project. According to the payment bond, the contractor is obligated to uphold the terms of the contract.
The purposes of a contractor license bond is often misunderstood by construction professionals. Many feel that a contractor license bond protects the contractor. However, the bond protects the general public by ensuring that the construction company will adhere to stipulations found within the bond’s legal language. Once the bond is signed, it makes sure that contractor agrees to work according to certain norms and regulations specified.
The typical cost for such can be as low as .5% of the contract amount to as high as 4% of the contract value. This is due to several factors, such as the credit worthiness of the construction firm and the amount of bonds they purchase per year.
If a contractor is found to be in default of the contract, a claim can be filed against them. Often times the surety will speak with the contractor. Hopefully, they can come to an agreement about getting things back on track. If this is not possible, then the surety may take over the project by funding the completion of the work and hiring a replacement contractor.
If a subcontractor or supplier fulfills their contractual obligation and the contractor does not pay them, they may file a claim. This requires a simple letter to the surety company. In the letter, the subcontractor or supplier explains their justification for filing the claim. The more paperwork the subcontractor or supplier provides the surety bond producer, the better a surety bond producer can make a decision.
Generally, there are two ways to apply for a construction surety bond:
This is an application which is decided by the determined by the individual’s credit history. A Fast Track application can be used for projects or contracts under $250,000. The fast track application should be submitted with the following items:
This can be used for all contracts regardless the size or scope of work. In order to apply for the Bond Kit application, it should be submitted with the copy of contract or bid speculations.
Get your free contractor surety bonds carrier quote in Massachusetts, New York and nationwide.
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Commercial surety bonds cover a wide variety of surety obligations. This category includes everything from non-sticks and bricks construction such as large commercial contracts to court bonds.
We have longstanding access to some of the nation’s best carriers and underwriters which will allow us to obtain the most competitive terms on all bonds, even those most difficult to obtain. Surety Bond Professional provides commercial bonds including:
A commercial bond guarantees that the principal follows local statutes and laws. Commercial Bonds are a general classification of bonds. Therefore, they play an essential role in supporting a business or professional in obtaining a license or permit. Yet, there are several types of surety bonds.
A government agency (including federal, state or local), usually requires that a business apply for a commercial bond. Also, it is important to know, that a commercial bond must be renewed every year, for the initial term. Finally, a bond may need a specified expiration date and alignment with the calendar year.
Commercial bonds play a crucial role for protecting the public. This is because government agencies need these bonds to keep the public safe from consumer fraud, failure to complete a project or unethical practices.
Here are some common examples of these bonds:
Commercial surety bonds are available in a wide variety of specialties. Although there are many bond types, almost all business owners are required to be bonded. This helps to ensure that they operate in conjunction with the state’s guidelines and laws.
Whether searching for a bond premium quote or ready to buy a bond, the most convenient way to get started with the bonding process is to look for a professional bond service provider and complete their online application. Then, the underwriter can provide the lowest quote.
Surety Bond Professionals offers a convenient online quote system. Apply today!
Surety Bond Professionals is a family owned and operated bonding company with a focus on construction bonds. We have access to over 25 surety markets and over 30 years of experience providing all kinds of surety bonds. Headquartered in Massachusetts, we proudly serve clients nationwide through our convenient online quoting process. Find the bonds you need, get expert assistance from our knowledgeable agents, and apply today.
We have a proprietary approach that allows contractors to bid on larger jobs and win more. Our Best in Bonding process also helps our clients grow their revenue year-over-year.
We ensure our clients are in the best position to win contracts by offering them sliding scale rates that are ultra-competitive with the market.
Why worry about burdensome bonding paperwork?? Our unique Best in Bonding approach allows our contractor clients to focus on what they do best: performing the work and making profits.
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