When looking for a contractor to handle your construction project, choose one with a bond. A contractor bond is the assurance that the contractor that you hire shall perform the way they promise you. If the contractor fails to perform as per the promise, the company that issued them with the bond pays the damages. This is simply how a construction bond works. It’s important to ensure that a construction company has a bond before you hire it. Binding is one of the ways of regulating the construction industry. Here are some of the types of bonds commonly used in the construction industry.
This is a bond that protects a property owner. With this bond, the property owner is assured that the hired construction company will honor the original amount of the bid. A contractor and the bond issuer can be sued to recover costs. Bid packages include bid bonds as well as the financial information of the bids. It’s important to note that not all projects require bid bonds. However, bid bonds are necessary for large construction projects.
A performance bond assures the project owner that the construction company will perform as per the terms of the signed contract. Perhaps, you have come across construction projects that have been abandoned halfway. A performance bond protects project owners from such occurrences.
If a construction project is left incomplete or if a contractor does a poor quality job, the project owner will be compensated if the contractor has a performance bid.
This bond ensures that a contractor pays suppliers and subcontractors. If something happens and the contractor fails to pay the electrician for example, they can go after this surety and the contractor will be have to pay them.
A license bond ensures that the hired contractor is licensed to complete a job. This bond is bought by a contractor when it’s a bidding requirement for a project. A contractor without a license bond can face numerous problems including license revocation and heavy fines.
It’s important to choose a contractor with these bonds when hiring building a house to ensure your safety just in case things fail to turn out as planned.