As a contractor, you are aware of the complexities of your industry. Working with clients, local, state and federal regulations, sub-contractors and everyone in between can be a balancing act fit for the circus. You may wonder why you need a surety bond for a project when you already have contractors insurance.
A surety bond ensures contract completion in the event of contractor default. A project owner (obligee) seeks a contractor (principal) to fulfill a contract. The contractor obtains a surety bond from a surety company. If the contractor defaults, the surety company is obligated to find another contractor to complete the contract or compensate the project owner for the financial loss incurred.
There are four types of surety bonds:
- Bid Bond: Ensures the bidder on a contract will enter into the contract and furnish the required payment and performance bonds if awarded the contract.
- Payment Bond: Ensures suppliers and subcontractors are paid for work performed under the contract.
- Performance Bond: Ensures the contract will be completed in accordance with the terms and conditions of the contract.
- Ancillary Bond: Ensures requirements integral to the contract, but not directly performance related, are performed.
Each variety of a surety bond can help protect the interests of your growing business. Any Federal construction contract valued at $150,000 or more requires a surety bond when bidding or as a condition of contract award. Most state and municipal governments as well as private entities have similar requirements. Many service contracts, and occasionally supply contracts, also require surety bonds.
Whether you are an electrician, plumber or general contractor, you have most likely handled surety bonds before. These vital forms of business protection are not typically included in your general contractors insurance policy, although many insurance providers also issue surety bonds.
Whether your contracting business works with a single municipality or dozens of regulatory bodies, agents at Gallant Insurance can assist you in all your surety bonds or general contracting insurance needs. We can help identify your insurance and surety bond needs, suggest coverage options, and assist you in finding a number of quotes from a variety of providers. Contact a Gallant Insurance agent near you to find out how you can protect your business with a policy or bond that meets your needs and budget.