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Yes, Even Small Contractors Need to be Bonded

A contractor bond is an essential coverage for businesses. Aside from being a requirement in many states in the US these coverage provide a reliable safety net for firms, especially those that offer general contractor services. Both large and small contractors need to be bonded to protect and uphold your business’ sustainability.

The Usefulness of bonds

A Contractor’s Bond is not a requirement in every state for every contractor’s dealings, but this coverage provides added financial backing for any unplanned circumstances that can occur during or after a project.  Much like insurance, a bond also boosts a general contractor’s chance of obtaining the major and even the minor projects. But for the case of many developed states though, being bonded is an absolute requirement before being allowed to bid on projects or independently offer services to clients.  Here is a closer look at construction bonds.

Forms of Bonds

Contract bonds, known as “Surety Bonds,” come in different forms and each provides for particular circumstances.

1. Bid bond. This, in particular, ensures that upon acceptance of a specific bid by a customer, the Contractor will eventually proceed with that contract and will immediately replace the bid bond with a performance bond. Otherwise, the Bonding Company pays a customer the deviation on contractor’s bid and a next highest bidder.

2. Performance bond. This serves as a commitment by bonding company to settle payments when the order is complete.

3. Payment bond. This bond ensures that the Contractor will pay materials from suppliers and services provided by Subcontractors.

4. Maintenance bond. This bond functions much like warranty wherein the Contractor pledges to deliver therapeutic and upkeep services for a specified period.

Facts to keep In Mind

While this information is reassuring, there is still some additional information about bonds. All bonds include bond premiums as part of market competition and risk. Depending on the type of bond you seek, the percentages can range anywhere from 1% to 20%, and they could include a minimum charge or even be set to a graduated rate. Don’t forget that bonding rates can also vary according to the applicant’s credit.

The time required to get a bond can range, depending again on the type of bond, from anywhere to same day, to a few days, to a week or more. Bond duration also varies according to type and can be from 1-3 years, the duration of a project, or a court-appointed time span. So whatever type of bond you choose, make sure to do your research, so you get the right bond for the right service for the right amount of time, and with the right amount of coverage. With a bond like this, you have the research and guarantee of the surety to minimize your risk.

by ·Comments Off on Only Hire Bonded and Insured Contractors
Only Hire Bonded and Insured Contractors

Do you want to hire a contractor to carry out some work on your property or home? Are you aware that you can be safeguarded from contractors if something goes wrong? If you are planning to hire a contractor for your home improvement project, then you need to ensure that he is insured and bonded. Hiring a contractor who is not bonded and insured is risky as you will not get any compensation in case something wrong happens during your contract.

Differences between Contractors Bond and Contractors Insurance

A contractor’s bond protects the client in case the contractor does not finish his job as agreed like failing to pay subcontractors or not paying licenses on time. This gives you the surety that you will not lose money or your property to be damaged during the contract. The bond guarantees you that the contractor will perform the contract as agreed or else he will lose his money for doing a shoddy job.

Contractor insurance covers the damages that might have been caused to your property or offers compensation to workers who are injured while executing your contract.

Reasons why you should only hire insured and bonded contractors only

There following advantages can be enjoyed when hiring bonded and insured contractors as opposed to the ones that are not insured as discussed below;

  • A bonded and insured contractor has all required building permits and this assures you that your project will meet all the safety and building codes. He ensures that your project meets all the professional standards.
  • The contractor may be fined or get censured by contractor’s board if he fails to perform the work as you had agreed in the contract
  • Bonded contractors add value to your home when you want to sell it. This is because most lenders will look for the permit of the contractor who renovated it before approving the funds.
  • Having an insured and bonded contractor for your project helps you to avoid unnecessary liabilities like innocent accidents or unsafe procedures used by workers that may lead to injuries.
  • It helps you to recover your funds in case your contractor neglects your project or if he dies.

Conclusion

If you want to avoid the risks and stress involved with hiring uninsured contractor, then you need to hire a contractor who has good credentials of his trade. Hiring a bonded and insured contractor will ensure that your project runs smoothly and is completed within the agreed time.