A contractor bond is a type of contract whereby the company assures the client that the listed contractor will not go against the contractor license law. Contractor bonds work for both the contractor and the customer and it is, therefore, important as a contractor to understand how and why should get your contractor bond. On the other hand, as a client, you need to make sure that the contractor you are about to hire has a contractors license bond which is up to date. This is for your properties safety as well as financial assurance.
Types of contractor bonds.
The contractor bond has three major categories which include the performance, payment, and the licensing bond. In the performance bond, the client is assured that the project will be completed in the stipulated time. For instance, in case a contractor fails to complete the work, the company will be forced to provide another contractor to finish the work. The payment bond prevents the client from double payment in case of contractor’s insolvency whereby the reassigned contractor might come claiming for payment. According to contractor bond, in such situations, the company are responsible for the payment of the reassigned contractor to complete the work. The bond also states that the contractor should pay any employees and subcontractors. Last but not least, the license bond says that the company will be fully responsible for any damage caused by their contractor during the work process. In addition to that, they are also responsible for any stolen items from the project.
The importance of having a contractor bond.
Having a contractor bond is imperative because it assures protection to both the client and the contractor. Through the contractor bond, one is convinced that the company will follow the law and safety as the do the work. The contractors bond also helps in reducing the cost that may be incurred mainly in damaged properties.
The type of bond you decide to choose is determined by the kind of work the company is doing, and they are received either the state or the local municipality. You are also expected to pay premiums based on the type of work and your licensing history.
The contractors bonds boost the confidence of the client while hiring a particular company since they are assured quality work under minimum supervision. Surety companies who deals with this type of bonds can help you determine the type of bond that suits your job as a contractor.
For additional Resources Check out the following Contractor Bond Blog