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If you are a contractor, you may be required to purchase a bond or bonds when working on a job. This agreement can help assure project owners that you will fulfill your job duties. In many cases, purchasing a bond (or bonds) can help prequalify your company for a job.
Vozza Insurance Agency is Traverse City’s trusted insurance provider and can help you navigate the complexities of construction bonds. Give us a call today at 231-938-6200 or toll-free at 800-668-5910 to learn more about bonds.
What Is a Surety Bond?
A surety bond is an agreement in which a surety company assures a project owner that a job will be fulfilled by a contractor. In this process, the surety company prequalifies a contractor and then assures the project owner that the company can perform the duties outlined in the contract.
There are three types of surety bonds:
Bid Bond. Provides financial assurance that the bid has been submitted in good faith. The contractor intends to fulfill their responsibilities at the bid price and will provide the necessary performance and payment bonds.
Performance Bond. Protects the project owner from financial loss if the contractor fails to perform the duties outlined in the contract.
Payment Bond. Guarantees that the contractor will pay subcontractors and laborers and for supplies relating to the project at hand.
Even with these three types of bonds, there may not be enough surety capacity to provide a bond on the entire job. Therefore, the subcontractor may have to ask the lead contractor to purchase materials and/or equipment while also executing a labor-only contract. There are also phased contracts in which a surety bond is issued for each phase of the project versus the project as a whole. In these instances, receiving a bond on the first phase of the project does not guarantee a bond in the later phases.
Contact Us Today
Contact us to learn more about bonds and to find out whether your company is prequalified to receive one. The agents at Vozza Insurance Agency are ready to help.