Purchase a Contractor Bond to Increase Public Confidence in You

When you decide to get a new house, or a commercial establishment built, you need to look for good builders to do the job for you.

When you decide to get a new house, or a commercial establishment built, you need to look for good builders to do the job for you. A good builder is one who knows all intricacies of building your home or commercial building – what kind of material should be used, how much time would be needed, how many workers to employ etc. However, one of the biggest problems consumers face with builders today is delay in completion of work. Most builders usually overshoot the deadline by atleast a month. This results in increase in costs to the consumer, as well as causes general inconvenience. Also, many builders do not always build the premises/ home as per the instructions of the buyer, but resort to their own design. As a result of this, public confidence in contractors is low. One of the best ways to assure the customer that such delays and mistakes will not occur is to purchase a contractor bond.

A Contractor Bond involves three different parties. The first party is the consumer, the second party is the contractor, and the third party is the company writing the bond. A Contractor Bond is an assurance to the consumer, from the bonding company, that the work will be completed and the vendors paid, in case the contractor is unable to do the same. Such a bond also covers things like damage to the property – whether caused by negligence on your part or accidentally. Contractors that are bonded gain a competitive advantage in the area of consumer confidence. Such a bond shows the consumer that you are financially able to obtain the bond, and interested in the well being of their project.

There are many kinds of contractors bond. One of the more popular types is the bid bonds. There is nothing very unique about this bond, except that you need it while undertaking government projects. A project owner who requests a bid bond wishes to ensure that you do not entertain any frivolous bids. The bid bond can be converted to a performance bond on awarding of the project. Performance Bonds make sure that the project is completed according to the expectations of the consumer. A performance bond requires that the contractor has collateral to back up the requirement of the binding company. Performance bonds cover 100 percent of the contract price and can replace the bid bond once the contract is awarded. A payment bond is more concerned with paying off the vendors in case the project is not completed on time. It is a guarantee, normally 20% of the bid amount, submitted by the contractor that the vendors will be paid off by the bonding company in case of default on the contractor’s part.

Thus, you can purchase different kinds of contractor bond from the bonding company, to have a better chance of getting a good contract. Some states require that you must have at least one kind of bond, to be eligible to undertake any project. This explains the importance of contractor bonding.

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Shawn Wise is the author of this article on Contractor Bond.
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Author: Skip Wise

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