Most businesses that are in operation know how important surety bonds are for paying one’s debts or loans. Having surety bonds enables all types of businesses to stay competitive in the market, establish trust amongst your clients, and helps further grow your business. In some cases, bonding is required by the law to practice certain specific kinds of businesses.
To help alleviate confusion about what surety bonds are, how they work, and the kind of bonds that will be required for specific jobs or businesses, we’ll help you understand the important facets of surety bonds. The following are some answers to important questions that often arise when you are looking forward to buying or opting for surety bonds.
What are construction surety bonds?
Also known as contract bonds, these are agreements between the surety company, the contractor, and the customer, which ensure that the contractor has the financial backing to complete a contracted job or service. In case they do not have the financial backing, the bond will show a line of credit that will cover the customer’s losses in the event of an accident. They are a form of securing yourself and the customer on financial terms.
Are they similar to Insurance policies?
Unlike insurance policies, surety bonds loan money to cover losses, which take place when a business is unable to meet the contractual requirements that were agreed upon. The business is therefore obligated to repay the money that is fronted with the help of surety bonds.
What jobs require construction bonds?
Although contractors belonging to the private sector do not require bonds, most contractors recognize their value and utilize them. Mostly local, state, and federal governments, along with general contractors and regulatory bodies, require contract bonds.
What kinds of contract bonds exist?
Although there are a variety of bonds that exist, some of the most common include the bid-bonds, the performance bond, the payment bond, and the maintenance bond. They are all required for different purposes depending on the type of business that you own. For example, to guarantee quality work a performance bond would be required and for guaranteeing payment of suppliers and subcontractors, a payment bond is required.
What are License and Permit Bonds?
License and permit bonds are required by almost every state since they guarantee that the contracting company will abide by the state, local, and federal rules, regulation, and laws. Therefore, it is important to note that they are not similar to contract bonds, as they do not guarantee individual jobs.
What does a contract bond cost?
Usually, contract bonds cost from 0.5% to 3% of the contract value. Although the cost of the bonds will vary depending on the size of the contract, the premium is due as soon as the bond is implemented, although there are some underwriters that offer payments in installments.
How do you get a bond and will you need collateral?
In order to get a security bond, click on the following link:
Insource insurance group will not only get you unique forms of insurance but fulfill all your project needs. You will not require collateral to secure a bond, although the bond can change if the underwriter is uncomfortable with any risk that is represented by the bond. See how InSource Insurance Group can help you easily obtain your surety bonds, today!