Construction can be an extremely risky profession, especially when working with subcontractors to get a job done. Although they are vital in completing a project quickly and efficiently, an unqualified contactor can have a negative impact on the overall project. To combat these risks, learn more about obtaining surety bonds to shift subcontractor failure liabilities onto a surety company.
Definition and Benefits of Surety Bonds
- Relieves the project owner of risks of financial loss as a result of liens for unpaid subcontractors and suppliers. They also protect taxpayer money for public projects.
- Transition between construction of the site and permanent financing is smooth because there are no liens.
- Surety company can offer assistance such as technical, managerial and financial – to move the project along and reduce the chance of default (project failure).
- Surety company arranges for project completion, if the contractor defaults.
Types of Surety Bonds
- Bid Bond – provides financial assurance that the bid has been submitted in good faith. The contractor intends to fulfill his/her responsibilities at the price bid and will provide necessary performance and payment bonds.
- Performance Bond – protects the project owner from financial loss if the contractor fails to perform the duties outlined in the contract.
- Payment Bond – guarantees that the contractor will pay subcontractors and laborers, and for supplies relating to the project at hand.
We’ll be covering more on Surety Bonds in a later blog post. In the meantime, contact Consolidated Insurance + Risk Management with any questions.