We are a surety only agency that thrives on creating an unbeatable client experience! Our industry leading bond volume allows us to create programs that can be tailored to each individual client, getting them their bond faster at the cheapest cost! Below are a few reasons our clients love to work with us:
A Construction Bond, most commonly referred to as a contract bond, is used as a guarantee between 3 different parties during a construction project. This type of contract bond ensures no disruptions or financial loss occurs due to the contractor’s failure to complete the project or meet all specified demands as agreed upon. The 3 parties involved in a construction bond include:
Each member of this agreement plays a crucial role. The Principal is the person who purchases the bond, guaranteeing that they will complete the project to the standards as agreed to in the contract. The Obligee is who the bond protects in case of faulty work or monetary loss. The Surety is the company that takes responsibility for the Principal’s performance, guaranteeing they will adhere to the contract.
The cost of a Construction Bond varies. The cost of the project will play a significant role in deciding the total bond amount. The Principal will then pay the bond premium which is a small portion of the entire bond cost. This premium rages based on the Principal’s credit, current and past finances, and bond history. With good credit and good-standing with previous bonds, a contractor can expect to pay between 1%-3% of the total bond cost.
Construction Bonds are mandatory for all government-related building or improvement projects and are often required for projects owned by private entities as well. The primary purpose of these bonds is to protect the project owner, whether they are a private individual or a government body, from any financial losses resulting from faulty or incomplete work by the hired contractor.
At the start of a project, a contract is established and agreed upon by all involved parties. This contract specifies the work’s requirements and standards. If the contractor fails to meet these specifications, the project owner, referred to as the Obligee, has the right to seek compensation. This is where the bond comes into play. The Surety, a bond company like Bonding Solutions, is responsible for issuing the bond. In cases where the contractor does not fulfill the contract terms, the Obligee can file a claim with the Surety.
The Surety then investigates the claim and, if valid, compensates the Obligee for the losses incurred. This compensation might cover the costs of completing the work correctly or repairing any deficiencies. In essence, the Construction Bond acts as a financial guarantee that the contractor will meet their obligations as per the contract, thereby safeguarding the project owner from any potential financial harm due to the contractor’s performance.