What makes contract surety bonds necessary? These bonds protect public owners, private owners, lenders and prime contractors from the potentially devastating expense of either contractor and subcontractor failure. Given these protections, contract surety bonds are definitely a wise investment.
There are three basic types of contract surety bonds:
Because sureties must pay in the case of contractor failure, surety bond companies go through a rigorous and in-depth process in order to prequalify a contractor. This includes a thorough examination of the contractor's business operations. Before issuing a bond, the surety company must be fully satisfied that the contractor has:
When bonds are specified in any contract documents, it is the contractor's responsibility to obtain them. The contractor will include the bond premium amount in the bid (the premium is usually payable upon execution of the bond). If the contract amount changes, the premium may be adjusted to reflect this change.
Surety bond premiums vary depending on the size, type and duration of the project, as well as on the contractor. In general, premiums can range from 1% to 3% of the contract amount. Typically, there is no direct charge for a bid bond. In many cases, a performance bond incorporates the payment bond and a maintenance period.
1915 McCulloch Blvd N Ste 104
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