Hiring contractors for large construction jobs always carries risk with it. However, at Pinnacle Surety, we can offer a contract performance bond to give you protection and peace of mind.
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What Is A Contract Bond?
A contract bond is a form of insurance that guarantees the contractor’s performance. It protects the owner of a construction project, from contractor failure such as:
- Fraudulent acts under an agreement
- Work stoppage or refusal to perform any of the contracted terms
- The debtors (the contractor) not initiating payment claims.
- The contractor defaulting, or failing to complete their obligations under the agreement.
Performance bonds can be ‘on-demand’ or ‘conditional’. On-demand means the bond is always available to indemnify the customer. While conditional bonds will only take effect when certain events occur, such as;
- The contractor making a payment (for labor and material suppliers)
- When the contractor defaults on their debt payments or ceases operations.
Why Do You Need Contract Performance Bonds?
If you are a contractor, being able to offer contract performance bonds is crucial when bidding for large projects. In fact, you may be barred from the bidding process entirely if you are unable to provide a contract bond. Options like payment bonds also give you protection from contractors that are unwilling to pay for services rendered.
Investors and developers need contract performance bonds to protect themselves against contractor failure during construction. Additionally, this bond guarantees that the contractor will be able to repay their debt in case of project abandonment or any other covered reason.
When there are contract bonds in place, it drastically reduces the chances of a contractor breaking the agreement and leaving clients in a difficult situation. Due to the risks involved, many projects will only be awarded once contract bonds are in place, so they are an essential part of the bidding process.
How Can Pinnacle Surety Protect Your Interests?
Pinnacle Surety is the leading surety provider for contract performance bonds, which are vital for customers and investors alike.
With exceptional customer service representing your best interests at all times, you know you are being looked after when dealing with us. Our underwriting process is simple and easy to manage, so there are unnecessary delays or paperwork during the application process.
We offer several different bonds to fit all kinds of construction projects and give you the protection that you need.
Performance Bonds
Contractors fail to complete projects even after receiving payment, which is why these bonds exist. Construction performance bonds guarantee that the contractor will complete all tasks outlined in the contract. If they fail to do so, you have the financial protection that you need, so you don’t lose your investment and you can continue with the project. Completion bonds for construction can also be written to guarantee that the project is finished on time and within budget. This is especially common in public projects where budgets are tight and time constraints are very important.
Usually, contractors are less likely to leave the project unfinished when performance bonds are in place, so you can avoid any stressful situations with half-finished jobs.
Payment Bonds
Payment and performance bonds for construction are there to guarantee that everybody involved in a job gets paid no matter what. So, even if the contractor runs into problems, all of the suppliers and workers will be paid because the labor and material bonds are there to protect them. It’s good practice to use payment bonds in all cases, but they are a requirement for public projects.
If you are a contractor, you will likely find that subcontractors are unwilling to work on the project unless you can prove that you have bonds in place to act as insurance should something go wrong.
Subcontractor Default Insurance
When dealing with subcontractors, a general contractor puts a lot of trust in them. They promise to complete work to the agreed-upon standard, but that does not always happen. Subcontractor default insurance can protect general contractors in these situations and make sure that they are compensated. General contractors are held responsible for the actions of the subcontractors they bring on board so having the right insurance in place is crucial.
Subcontractor Performance Bonds
Performance bonds are available for subcontractors too. This bond guarantees that the subcontractor will perform all of their obligations in accordance with the contract. Therefore, if something happens and they can’t complete the work, you are protected financially. Although the upfront cost of subcontractor default insurance tends to be lower than subcontractor performance bonds, the out-of-pocket costs when making a claim can be much higher. Contractors need to consider the coverage they will get and the size of the project when making their decision.
Get The Protection You Need With Pinnacle Surety Construction Bonds
Managing risk in the construction industry is a crucial part of the project development and bidding process. Investors need assurances when hiring contractors and general contractors need financial protection when dealing with subcontractors. Bond companies for contractors, like Pinnacle Surety, are here to provide that protection.
If you want to improve your chances of landing big projects, you need the right contract performance bonds in place before you throw your hat in the ring. Many of the most lucrative public projects require this kind of protection, so if you want to grow your construction business, you need to use performance bonds.
Here at Pinnacle Surety, we have a wealth of experience helping general contractors, subcontractors, and other parties involved in construction projects. We understand that the world of insurance and contract performance bonds can be confusing and you may have a lot of questions. If you have never used these financial instruments before and you don’t know where to start or what kind of protection you need, we are here to answer any questions you may have.
We have over 25 years of experience working as a contractors bond company and we are committed to building long-lasting relationships with all of our clients. That’s why you always get the best possible customer service when you deal with us. We are here to support you and help you grow your construction business with bid bonds to help you win more lucrative construction jobs with the financial protection you need.
Get in touch today to learn more about how a construction surety bond could protect you during your construction projects!