Reinforcing Your Construction Business with Bonds
Individuals purchase insurance to cover losses and damages. Similarly, business entities procure insurance to protect their interests. As a contractor, you need to purchase a special type of work-related insurance known as a construction bond. Many owners require contractors to carry construction bonds that protect their projects from disruptions or financial losses that prevent completion of the project or construction according to project requirements. Here are a look at common types of construction bonds available and how they work.
What Are Some Common Types of Construction Bonds?
The most common construction bonds include the following:
- Contractor License. These are usually required by government owners before you can work on the project. It’s a guarantee that you follow all applicable laws and regulations.
- These bonds guarantee that you will contract with the owner for the bid amount if awarded a project.
- These bonds are often required for contracts over $100,000, covering your subcontractor’s and suppliers’ invoices in the event that you can’t pay them for their work.
- This guarantee that you deliver a project according to contractual terms, including scope, schedule and quality.
- These bonds are used to reimburse a purchaser for the loss if you fail to obtain supplies or materials.
What Other Bond Types are Available?
Other bonds include maintenance bonds, subdivision bonds and site improvement bonds, which may be required of contractors that specialize in maintenance work, municipal projects and renovation jobs. Consult an insurance agent that is an expert in coverage for construction work for the right plan for you.
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