A Brief Overview of The Bond Industry
If you have ever worked with a contractor, you might have heard them tell you that they are a bonded business. If you are a contractor yourself, you might also see in contracts that you must prevent proof of bonding.
What is a bond? How does it work?
Bonds are part of a wide and varied industry of financial protection. They help contractors, their clients and others remain secure if something goes wrong in the deal. Thus, they are critical protection every contractor should carry.
What are bonds?
On a basic level, think of bonds as promises. If Party A buys a bond, they essentially create an IOU. They can this use this bond to promise Party B that they will pay them back if the need arises.
Let’s look at this in terms of a contract. If you enter a contract with another party, you will strive to do that work according to the rules of the deal. Yet, sometimes, you simply can’t do so. That creates a situation where the client might expect repayment. The bond will guarantee them that you can repay them. So, it is a little like liability insurance.
However, unlike insurance, bonds don’t usually free the carrier from a financial obligation. They only guarantee that the contractor will repay the client in question. In other words, they prove that you have the assets and support to fulfill your obligations. You’ll repay the client directly in most cases, though you might repay the company issuing the bond. They will in turn compensate the client.
Our Bond Offerings
The types of bonds vary. Which one will you need? Here are just a few of our offerings.
- Contract performance bonds: Guarantee that a contractor will complete their work satisfactorily.
- Bid bonds: This bond plays a part in placing a bid for a contract. You might have to provide proof of the bond before you can even bid. It will prove that you will take the job if selected.
- Maintenance bonds: After you finish a project, this bond comes into play. It will protect the client for a period after the work finishes. It usually applies to defective work, or related issues.
- Payment bonds: If you use subcontractors, this bond promise that you will pay your workers.
- Supply bonds: If you provide materials, this guarantees their delivery to clients.
- License and permit bonds: Guarantee that you will operate under all local, state and national regulations.
Some clients will require some of all of these bonds, and there are countless other bonds out there. So, don’t hesitate to talk to one of our agents about the one that is right for you. We can guarantee that you always receive appropriate protection.