Performance Bond Insurance: Welcome to the Big Leagues
Performance bond insurance is a pretty big deal. Any contractor looking to secure big contracts needs to develop a thorough understanding of what performance bond insurance is and how it works. Any kind of bond ensures the party issuing the contract that they will not suffer a financial loss should the contractor fail to perform some aspect of the contract. In such a case the performance bond insurance provider covers the loss.
Let’s take a look at performance bonds along with other the most common forms of surety bonds used in construction:
Performance Bond
A performance bond ensures that the contractor will complete all work specified in the contract to an acceptable standard. Contractors generally fail to complete contracts as a result of bankruptcy.
Payment Bond
A payment bond ensures that the contractor will pay for any construction materials or labor that might be necessary to fulfill the contract.
Maintenance Bond
A maintenance bond ensures that the contractor will maintain the site well and do any repairs necessary. Contractors might be required to perform maintenance as a result of weather damage or damage resulting from construction.
Bid Bond
Bid bonds are required when there are a number of contractors competing for a big contract. The bid bond is needed to ensure that if the winning bidder should later be unable to begin work on the project, the party issuing the contract will not suffer a loss.
Site Improvement Bond
Sometimes a contract might demand specified site improvements apart from the main construction work. For example a contractor hired to build a new wing of a building may also be required to add double glazed windows to the entire building.
Subdivision Bond
A subdivision bond is the same as a site improvement bond but refers to the construction of a whole new structure.
Other useful posts
- Guide to finding the perfect bonding company
- The Importance Of Your Surety Bond Claims Advocate
- Breaking down performance and payment bonds
- A comprehensive guide on how to Become bonded contractor
- Other types of bonds
- What is a bond?
- What do construction bonds cover?
- Surety bond claims – How do surety claims work?
- What does it mean to be bonded?
- Qualifying for a surety bond as a contractor
- Why are construction bonds required?
- How to apply for a construction bond – A complete contractor’s guide
- How much do construction bonds cost?
