There are so many things that can go wrong during the construction process. Whether it’s an office block, residential property, or a commercial site, a building project takes a lot of time. The process can take months or years, which is a lot of time for challenges to arise.
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When a construction project doesn’t go to plan, it can cost your business a great deal of time and money to repair the damage. That’s why it’s essential to have insurance in place to protect you. One of the best forms of cover is construction surety bonds.
Read on to learn more about construction surety bonds and how they can help you protect and expand your business.
What are Construction Surety Bonds?
A surety bond, or completion bond, is a form of guarantee that protects against disruption occurring throughout the construction process. There are plenty of things that can go wrong, and some of the possible scenarios you’ll want to safeguard yourself from include:
- A contractor falling behind either due to poor performance or other unforeseen occurrences.
- Cash flow problems that make continuation of the project difficult or impossible.
- A lack of resources meaning the project cannot be finished on time.
When you make use of a construction surety bond, the contractor or party managing the construction work is effectively making a promise to complete the project according to the terms of the contract. If they fail to do so for whatever reason, the contractor is held liable.
There are three main parties involved in a construction surety bond:
- The investor, or project owner
- The contractors or parties building the project
- The surety company that backs the bond
What are the Different Types of Construction Surety Bond?
There several different types of construction surety bond, all protecting against different outcomes. The three main types of construction insurance bonds include:
Bid Bonds
When a contractor makes a bid for a construction project, they are required to submit a bid bond at the same time. This protects the investors and owners of the project if the contractor then backs out of the project after winning the bid. This guarantees that once you have accepted a bid, the contractor will take it and the work can proceed right away.
Performance Bonds
When you accept a contractor’s bid and they begin the work, you expect them to maintain high standards of performance and work ethic. But taking out a performance bond as protection is a good idea. The bond covers you in the event that the contractor’s work is subpar or does not fulfill the terms agreed by their contract.
Payment Bonds
Payment bonds, otherwise known as labor and material bonds, serves as a guarantee that the winning contractor has the financial means to pay their workers and subcontractors, as well as acquire the materials necessary for completion of the project.
As well as these three primary surety bond types, others include site and land development bonds, subdivision or municipality improvement bonds, subcontractor bonds, grading surety bonds, and contract bonds.
What are the Benefits of Surety Bonds in Construction?
There are so many great reasons to consider taking our construction surety bond insurance. These benefits include:
Peace of Mind: Taking out contract surety bonds is a great form of developers surety And indemnity coverage that gives you peace of mind that the project will go to plan. You know you are protected in the event of disruption, so you don’t have to worry about loss of time and money.
Avoid Financial Loss: The longer a project runs, the more expensive it will be. Not to mention the expense of finding new contractors and resources when things don’t go to plan. Taking out a construction completion bond protects you from financial loss.
Quicker Completion: Completion bonds for construction reduce the likelihood of contractors failing to fulfill their contract, so the work is much more likely to be finished on schedule.
Expand Your Business: When you have construction surety bond insurance in place, your success rate will increase and you will be able to win new projects and expand your business much quicker.
Get in Touch
If you would like to grow your construction business and ensure the successful completion of all construction projects, taking out construction surety bond insurance is a smart move. Get in touch with the team at Pinnacle Surety to learn more.