Performance Insurance is your source for contract bonds
: bid bonds, performance bonds, payment bonds, and maintenance bonds. We work with surety companies across the nation to bond construction projects of all sizes.
Contract Bond Types
Many projects start with a bid bond. The bid bond guarantees that your promise to accept the project if you win the bid will be good. If you win the bid and do not accept the project, you will be required to pay the penalty amount of the bid bond. The penalty is often 10% of the bid amount.
Cashier's checks can often be used as security instead of a bid bond. While this is sometimes convenient and helpful for last-minute bidding, it is generally better to use a bid bond since the surety company providing the bond will be able to analyze the risk up-front to ensure they will be willing to write the performance bond. The last thing you want is to win a bid, and then find that no one wants to provide the performance bond.
Performance bonds are used to hold you to the terms of the contract. The construction contract describes what must be done, in what timeframe, and at what cost. If you have promised to build a $500,000 building by August 31st and the project was bonded, you probably have a $500,000 performance bond. If you do not complete the building according to the terms of the contract, a claim can be made against the bond and you will be held responsible for paying the claim according to the agreement you signed with the surety.
Payment bonds are often required (and, in fact, can be part of the performance bond) by the project owner to ensure that you pay for your labor and materials. Why? If you fail to pay a sub-contractor or a material supplier, for example, they could place a lien on the project. This can result in the project owner having to pay your expenses directly. The payment bond prevents this from happening by off-loading the risk to the surety who, like with the performance bond, will require that you reimburse them.
Maintenance bonds ensure that any maintenance or warranty provisions in the contract are honored. For example, if you bid a project to pour $200,000 in sidewalks for a municipality, the municipality may require that you warranty your work for some period, such as 2 years. If something goes terribly wrong after 1 year and you are unwilling or unable to fix it, the municipality can make a claim on the bond.
How Do I Get a Contract Bond?
Performance Insurance will work with you to complete the application required by the surety. The chances of getting your bond approved will depend largely on your credit and your experience, as well as the specific project you intend to work on. In most cases, once a surety company has agreed to support you, they will continue to write bonds for you without a lot of hassle. In other words, in the beginning, you must demonstrate that you are a good risk - that you know what you are doing and that your company is financially stable.
Just give us a call at 866-992-3838 to get started.