When hiring a contractor there is a big difference between contractors that are insured, a contractor that is bonded or one that is both insured and bonded.  Exactly what are those differences and how do they affect you as a homeowner?

When a contractor is bonded and insured it offers an incentive for homeowners to hire them over a contractor that is not.  Reputable home improvement specialists purchase bonds and insurance to protect consumers they work for while offering recourse in case something should go wrong.

A contractor’s bond offers protection to consumers against contractors failure to complete the job as the contract states, doesn’t pay for the proper permits or other financial obligations and such.  In order for a contractor to become bonded they must pay a premium to a surety bonding company.  Once the premium is paid by the contractor they are given a bond number and certification that confirms the surety company has agreed to provide protection to the consumer against several different issues that can arise from contractor error.

If you as a consumer feel that the work completed by the contractor is subpar or if materials and subcontractors aren’t paid they can contact the surety company direct to submit a claim.  The state and municipality where you reside will determine the bonding requirements contractors must meet to ensure they have the proper contractor bond.  Be sure to research these requirements before you hire a contractor to do work within your home or business.

A contractor that states they are licensed to perform work is different than those that are bonded.  Two types of insurance commonly associated with contractors in the construction industry: liability insurance and workers compensation.

Liability insurance protects against property damage that occurs because of work that is performed by the contractor.  It does not however cover issues related to poor quality workmanship.  Those issues are covered under a contractor’s bond.  This is why hiring a contractor that is both insured and bonded is important to protecting you as a consumer.

Workers compensation insurance is purchased by contractors to project against workers lost wages and medical services when they are hurt on the job.  The families of the worker are also compensation benefits through workers comp insurance in the event of a death that occurs while at work.  This is important insurance to look for as a homeowner when hiring a contractor to avoid being financially responsible for injuries that occur on your property while contracted work is being done.

To protect against any wrong doing on the part of the contractor be it intentional or unintentional it is important for homeowners to require contractors working for them to be both insured and bonded.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at https://www.bondingspecialist.com.

Within the construction industry bonds are frequently used to help reinforce industry regulations and contractor/client relationships.  Many of us outside the construction and bonding issue are at a loss when trying to understand the purpose of construction bondsas well as how they work to benefit each individual in the process.  Don’t worry though because this article will shed some light on the different bonds needed when working within the construction industry.

Below, we will offer a detailed look into the four most common surety bonds that construction professionals should familiarize themselves with.  The most frequently requested contract bonds that help to regulate the construction industry are as follows:

• Contractor License Bonds
• Bid Bonds
• Payment Bonds
• Performance Bonds

Contractor license bonds are purchase by a contractor in order for them to become licensed within the state to work within the construction industry as a legitimate business entity.  Different states, counties, cities and subdivisions often require their own license bond.  Without the necessary paperwork filed contractors will not be able to obtain the proper licenses.  If a contractor does not have the proper licenses they will be faced with penalties, fines, legal action and license revocation.

A bid bond is not always necessary but frequently requested when a contractor is submitting a financial proposal on a project to the owner.  The project owner may require a contractor to obtain a bid bond before accepting the contract that is being proposed.  A bid bond offers a guarantee that the contractor enters into the contract in good faith.  This means that the services and materials can all be provided per the terms of the contract.

Payment bonds are required for all jobs over $100,000 under the federal Miller Act.  A payment bond helps to ensure that all subcontractors and suppliers of materials get paid for their contributions to the project.  This type of bond protects a project owner from assuming these expenses if the contractor fails to pay them.  Payment bonds ensure that unpaid parties are paid through the liability of the payment bond.  The contractor is ultimately responsible to reimburse the surety company if payment to subcontractors or material suppliers if the payment bond is required.

Performance bonds are often paired with payment bonds as they both offer protection to the owner of the project against any loss because of shortcomings of the contractor.  A performance bond ensures that the project is completed as stated it should be in contract.  It also states that the project will be performed on time as stated.  If the projected is not performed, the owner can make a claim against the bond if unsatisfactory work is performed or the work is not done on time.  If the claim is valid the bond is paid by the bond company the contractor has to pay bond.

A bond company tries to only issue surety bonds to those contractors believed to be worthy of upholding their contractual obligations.   The process of qualifying for surety bonds can be a difficult process for construction professional.  Understanding how surety bonds work and working with a company that specializes in issuing bonds can help for a smoother process overall.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at https://www.bondingspecialist.com.

Surety bonds are often associated with insurance.  This is understandable for a few reasons.  Bonds provide coverage for losses that are incurred and are often sold by insurance agents.  The difference however is that with surety bonds they must be noted where as regular insurance does not.

In the article below we will discuss several types of surety bonds that small businesses need.  There are about twenty five thousand types of surety bonds available.  Below we will discuss the five most common types of bonds that a variety of small businesses should consider having before they begin operating.

Surety Bonds for Construction

Within the construction industry bonds are often required of contractors.  A license and permit bond is often required before a license is issued whereas performance bonds are more job specific.

License and permit bonds are required of contractors before a license can be issued.  This is to safeguard residents within the state from financial losses.  These bonds are often inexpensive based upon the contractor’s credit rating.  They can cost anywhere between two hundred and one thousand dollars.

Performance bonds are issued based upon the job.  It is issued to cover the performance that is contracted; this can be for a variety of reasons such as having a deadline to follow or a budget to stay within.  When a contractor is licensed and bonded it provides a financial confidence to their clients that the project they are contracted to provide will occur as stated within the contract.

Surety Bonds for Cleaning Businesses

When your occupation requires that you enter private property, such as in cleaning and janitorial services, it is important to acquire a janitorial service bond.  With the access workers are given to personal belongings it is important to have reassurance that businesses and homeowners are protected from theft.

When a cleaning crew is licensed and bonded they are providing extra assurance.  Their clients are protected from the service provider and their employees in case of thievery.  These bonds are inexpensive and communicate that your business is one that can be trusted.

Surety Bonds for Notaries

Integrity is important when it comes to notaries and the services that they provide.  A notary is a legal authority that authenticates documents.  A notary bond is purchased to protect against notaries that choose to act unethically.  A notary bond is usually inexpensive often as low as thirty dollars for a four year term and don’t usually provide a concern for those looking to become notaries.

This type of bond is issued based on a set of conditions that must be met in order for the notary to become licensed.  These conditions must be met before they are allowed to conduct notary services within a state.

Surety Bonds for Car Dealers

A motor vehicle dealer bond is required in order to provide protection against unethical practices that are committed by car dealers and their employees.  This is a relatively inexpensive business expense for most car dealers.  A motor vehicle bond prevents customers from being deceived by car dealers.  It offers assurance that car dealers will not sell stolen cars or sell a car based on misleading information.

As you can see is that surety bonds are not insurance but more a type of reassurance that the goods and services that are provided to consumers will be provided in good faith.  Surety bonds are purchased in order to prove that business is done in good faith.  It is an extra guarantee that goods and services are provided as contracted.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at https://www.bondingspecialist.com.

A construction surety bond is commonly known as a contractor’s license bond.  It is used to make sure that a construction project is completed as stated within a given contract.  In the event that the contractor is unable to complete said contract on time, within budget or other ramifications stated within the contract the surety company will guarantee payment to the owner to prevent financial loss.  This leaves the contractor on the hook to the surety company to pay back the amount that was paid out by the surety company.

In short a project owner or oblige enters into a contract with the principal or contractor to complete a specified project.  Then the contractor or principal secures a surety bond from a surety company or surety broker who sells contractor’s license bonds.  Local surety brokers can be found throughout online searches by looking under, “surety bonding firms or surety bonding companies”.

If a contractor fails to complete the project as stated within the contract the surety company must compensate the owner of the project for any loss or find another contractor that can complete the contract as stated.  The surety company may then proceed to seek repayment from the original contractor for their losses.

When it comes to any federal, state or local government project the contractor is required, by law, to be bonded in order to bid.  In fact some areas require a bond be in place before they will even consider issuing a contractor a construction license.

Surety bonds don’t only protect the project owner they work to cover subcontractors that are hired in order to complete projects that are contracted.  The surety bond will cover the expense of suppliers, subcontractors and damage that occurs to the property as a direct result of the construction project as well as tools and materials that are damaged or stolen.

Construction surety bonds are only sold through certain agencies that are known as bond producers or bond agencies.  The job of a surety agency is to work with contractors throughout the entire process of obtaining a bond as well as creating a relationship where they continue to supply bonds to the contractor as their construction companies grow and take on new commitments.  A bond producer plays an important role.  They should provide the following services:

• The surety company offers advice that increases the profitability of the company by looking into management and all the technical aspects of the business.
• The surety company will help contractors with their relationships with other service providers such as industry experts like accountants and attorneys.
• In order to ensure that the financial requirements are met by the contractor seeking a surety bond the company is responsible to review all financial documents that are required by contractors seeking bonds.
• The surety company is responsible for ensuring that the contractor has a surety bond that matches up with their needs. Most surety producers have relationships in which they offer bonds to more than one company.  With this in mind it is important that the surety producer is able to maintain relationships with several various surety carriers at one time.
• The main point of contact for a contractor is the surety producer. This remains the same throughout the entire bonding process.  The surety company must remain in contact with both the contractor and the carrier throughout the entire process of the project.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at https://www.bondingspecialist.com.

There are three basic type of bonds used within the construction industry.  They are the bid bond, the performance bond and the payment bond.   These three basic types of bonds are used to guarantee that contractor will perform the work contracted, at the price contracted within the period of time contracted.  If this doesn’t occur the bond company will pay the owner to prevent financial loss and the bond company will collect payment from the contractor.  Below is exactly how bid, performance and payment bonds work.

• Bid Bonds: This type of bond is obtained to guarantee that the bid that is submitted is in good faith. It states that the contractor enters into the contract at the price that is bid and will perform the required performance and payment bonds.
• Performance Bonds: This type of bond is obtained to protect the owner of a project from any financial loss if the contractor fails to perform the contractor as stated in the terms and conditions.
• Payment Bonds: This type of bond assurers that a contractor will pay the price specified to subcontractors, laborers and material suppliers as guaranteed within the contract.

In order to prequalify contractor needs to prove to a sureties company that they are an acceptable risk.  It is up to sureties to accept the risk of contractor’s failure based on a thorough analysis that pre-qualifies the contractor.  This ensures that the contractors business is a risk worth taking.  It is an in-depth analysis that ensures the contractor’s business operations are legit.

The surety company must be completely content that the contractor meets certain criteria before issuing a bond.  The criterion looks something like the following:

• High-quality references with integrity and solid business reputations.
• A strong ability to meet all of their current and future obligations in respect to both financial and employee abilities.
• Industry experience that matches the requirements that are stated within the contract.
• Equipment that is necessary to perform the work that needs to be done or the ability to obtain it when it is needed.
• The strength financially to support the desired load of work that is contracted within the contract period.
• A credit history that is established and a relationship with a bank that extends a line of credit if needed.

As a surety company it is important that they are satisfied that the contractors that they have extended surety bonds to will satisfy their requirements. The contractor should run a well managed, profitable company that fulfills their word fairly and performs all of their obligations within a timely manner.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at https://www.bondingspecialist.com.