Surety bonds are a three party agreement where a surety company assures the owner that the contractor will fulfill the services that they have agreed upon. These types of bonds are used in construction and usually called contract surety bonds. We have some tips that will help you get the most from these types of bonds and things associated with them.
The United States since 1893 has required that contractors on federal public works contract to get surety bonds. The main reason is to make sure the work gets accomplished and subcontractors and suppliers get paid. Almost all 50 states have adopted this as well which protects the owner from contractors taking the money and leaving town and not doing the work.
Many people wonder what types of bonds are needed and why surety bonds are needed and mainly because construction is a very risky business. The failure rate for this type of business and in bad economies it continues to rise even more. Surety bonds help protect people knowing the contractor will follow through on what they promise.
Surety bonds premiums vary from one surety to another. Many times this will depend on the size and the type of the project that is being insured and the duration of the project is also factored in as well.
Getting surety bonds means a contractor must meet certain requirements. Good references and reputation along with good credit history is looked at. Bank relationship with a line of credit is also needed. They also must prove they have the equipment to do the job as well. Surety bonds are there to protect people and to make sure the contractor does what they are suppose to.