Running a construction business is an intensive and fast-paced life, and it is important to make sure you think about how to make your company run more smoothly. You have a lot to consider when working in the world of construction, and it is important to consider safety and security. You will be dealing with a lot of money, and some projects can be highly intensive, so it is important that you are as professional as possible.
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Securing the right kind of insurance as a construction manager is important, and this is something you are going to need to sort for every project you work on. Being professional and diligent is essential if you want to enjoy success in the construction sector, and this means making use of surety bonds. Understanding the different construction bonds, why you need them, and how they can help you and your business is crucial, so let’s look a little closer at this.
What are Construction Bonds?
So, the important question to ask is what exactly are construction bonds? Also known as contract bonds, construction bonds are a type of surety bond that represents an important form of insurance in the construction world. You need to have these bonds in place before a project is even started, as you need to protect yourself and the business. They provide a financial guarantee that the bills and costs of a construction budget will be covered.
The company issuing the bond guarantees completion of the work by a specific contractor or contractors. And the idea of the bond is to protect the project owner (you) against poor quality work, or incomplete work. Understanding the different bonds, and what they offer you as a business, is so important when it comes to making the right choices.
Why You Need Construction Bonds
Insuring your company and your assets is just good business practice in any event, but it’s even more important in the world of construction. As the owner of a company or project, you are potentially going to make big financial losses as a result of incomplete work, or shoddy work that needs to be redone. What’s more, you may also be on the receiving end of some pretty serious lawsuits as a result of poor workmanship, health and safety breaches, and all manner of other outcomes that may result from incomplete projects.
This is why you need to have the right construction bonds in place in order to help you make the most of this. There are a lot of different bonds that you will need to familiarize yourself with, but it is essential that you are doing as much as possible to protect your company moving forward. Getting this kind of protection is a must for construction business owners and is going to help you preserve your company’s reputation.
Different Types of Bonds
There are three main types of principal construction bonds, and you need to know about them and how they can benefit your business moving forward. So, let’s take a quick look at the different types of bonds that play a role in construction insurance:
Bid Bonds
Bid bonds are there to protect you, the project owner, in the event that the contractor doesn’t honor the completion of the project. You have the right to sue the issuer in order to enforce the bond, but the hope is that it won’t come to that. A bid bond is required on most projects, and will generally be issued at around 10% of the project value; this is different when it comes to Federal construction projects, where the value is set at 20%.
Performance Bonds
Performance bonds are pretty self-explanatory, not to mention an essential part of the process of protecting a project. Performance bonds ensure that the contract will be completed in accordance with the terms of the project. This is something that is essential when you are trying to ensure quality throughout the business. If you don’t receive work to the level that you should, you can use the performance bond to sue and hand the work over to someone else.
Payment Bonds
Payment bonds protect the contractor by covering payment and the costs involved in carrying out work. Labor and maintenance costs are covered by this bond, and it helps ensure that the project will be completed, making it an essential bond for you.
These are the three most common construction bonds that you are going to need to sort out as much as possible to protect your business and your projects. You have to do what you can to make the most of this, and it is something that plays a massive role in doing what is right for your company. There are also maintenance bonds, which you may also want to look into as an additional way of protecting the business.
Why You Should Use Pinnacle
When you are looking to find the perfect construction bonds supplier to work with your business, you need to look no further than Pinnacle Surety. We are one of the leading bond agencies, and we strive to maintain the best relationships with our clients. We have been providing two decades of service to customers, and in 2017 we won the Surety Agency of the Year Award. If you are looking for a professional, trustworthy, and dedicated agency, we are the perfect choice for helping look after your business.
There are a lot of things to keep in mind when running a construction business, and it’s easy to become overwhelmed. So, you need to make sure you are focused on doing as much as possible to improve the way in which you secure the business. This means you have to make sure you use the right kind of insurance in order to protect your projects and give your clients peace of mind that they can trust you. We hope this has been a useful guide to surety bonds, and that you will get in touch with Pinnacle Surety today for all your surety needs.
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