What You Need to Know About Contractor Bonds
What is a Contractor Bond?
Surety bonds used for construction projects are called contractor bonds, contract bonds, or construction bonds. A contractor bond is used to guarantee that the contractor will perform the work as outlined in the contract. If the contractor doesn’t perform well, the project owner can look to the surety bond company to ensure the contracted work is completed. Contractor bonds include, among others, bid bonds, performance bonds, and payment bonds.
A bid bond provides a project owner with protection that the contractors bid proposal will be accurate and that the contractor will be able to obtain a Performance & Payment Bond if awarded the project.
A performance bond is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.
A payment bond is a surety bond posted by a contractor to guarantee that its subcontractors and material suppliers on the project will be paid.
A maintenance bond is a type of surety bond purchased by a contractor that protects the owner of a completed construction project for a specified time period against defects and faults in materials, workmanship, and design that could arise later if the project was done incorrectly.