What Is A Contractor Bond?
When clients are looking to hire a business for a project, licensed, bonded, and Insured are the phrases they trust. However, your company may be licensed and have Auto Insurance and General Liability Insurance, but not bonded. So here, we’ll take a quick dive into what is a Contractor Bond.
What Exactly Is A Contractor Bond?
A Contractor Bond is a contract to guarantee performance. The parties involved in this type of bond include—the contractor, the surety company, and their customer. The Contractor Bond protects the customer from financial or other consequences if the contractor can’t satisfy the requirements of their agreement.
How Does It Work?
The party affected by that contractor’s activities might file a claim seeking compensation for damages if the contractor doesn’t follow the contract terms. For example, if a contractor agrees to complete a job in 30 days and it takes 50 days, the customer may pursue damages to cover the cost of the delay. While the surety company will always guarantee payment, they will hold the bonded contractor financially responsible.
Who Needs A Contractor Bond?
Government contracts and large projects usually require a Contractor. However, most small or mid-sized contractors won’t need it, but many contractors buy this type of coverage for the sense of security it provides to their customers.