Despite bonds being common in the construction industry, there are many contractors and professionals within the industry that don’t understand them. You can consider bonds to be a financial guarantee. Here is what you need to know about common types of construction bonds.
Sometimes, when a project owner has a job for contractors, he or she will open up bidding on the project. If you want to bid on a job, the owner may ask you to obtain a bid bond. This is a guarantee that you will enter into the contract for the bid amount.
A performance bond protects the project owner if there are any problems with the contractors. In the contract, you guarantee that your team will do a quality job. If the project takes too long or if the owner is unsatisfied with the work, the performance bond will repay him or her.
If a contractor does not pay subcontractors or other team members, then the project owner could legally have to fit the bill. A payment bond protects the owner from these payments. It ensures that you will pay your team and your suppliers.
There are naturally a lot of different risks in the construction industry. Insurance, as well as bonds, protects your company and those who you work with.