Doing business with contractors in the construction industry is a serious matter. You spend much of your money to build a residential or commercial structure. Therefore, you must get the right contractor with a bonding agreement between the contractor and client for the construction project completion.
Surety Bonds Insurance in San Antonio TX ensures that the contractor runs the construction project well and keeps the promise to perform obligations on time. Surety bonds are a part of the construction industry’s success.
Basic types of contract surety bonds
- Bid bond. A surety bond that ensures the bid is submitted and the contractor enters into the contract according to the price bid, providing the bond obligations:
- performance
- payment bonds
- Performance bond. A surety bond protects the owner from financial loss in case the contractor fails to perform the contract according to the terms and conditions.
- Payment bond. It ensures the contractors pay the involved people in the project:
- subcontractors
- laborers
- material suppliers
Benefits of bonds
Surety bonds protect against the risks in the construction project. The people who are protected with the surety bonds insurance are:
- Owners
- lenders
- taxpayers
- contractors
- subcontractors
The reasons why these people are protected by surety bonds are:
- The contractor passes a pre-qualification process that ensures it can fulfil the contract obligations.
- The contractors complete bonded projects since the surety company needs personal or company indemnity from the contractor.
- The subcontractors don’t have to file mechanic’s lines on a private project once the payment is placed. The mechanic’s liens can’t be laced against the public property. The payment bond is the only protection these claimants have if unpaid for the goods and services.
- Bonding capacity elevates the project opportunities of a contractor or subcontractor.
- The surety company fulfils the agreement in case the contractor defaults. A contractor can experience serious problems. Surety bonds hold a fast and reliably complete instrument to lessen the risks in the construction.
Surety bonds provide a line of credit to the principal to ensure the obligee that the principal performs what is on the agreement.
Are surety bonds secured?
The surety company ensures that the surety bonds will be fulfilled by the contractor. The agreement that binds the principal and client is compiled according to the terms and conditions of the contract. When the principal or contractor fails to perform the agreed contract, the surety assures the principal will take the agreed conditions for the project.