“The main purpose of a construction bond is to provide the security, or guarantee, to the owner that the project he instructs the contractor to build will be completed in the case of failure or bankruptcy of the contractor's company,” says Robbert.
Why do companies need to be bonded?
Businesses may need bonds to complete many common business transactions, like applying for a license, bidding on a job, or signing a construction contract. Companies buy bonds so they can win jobs, compete with other businesses, and build a reputation as trustworthy.
What is the difference between being insured and being bonded?
The primary difference between the two is that your insurance protects you, and a bond protects a third party. If you own a business and experience a fire on your premises, your insurance would cover the damages. The Small Business Administration, does a great job discussing surety bonds.
What is the purpose of bonded?
They are a financial guarantee for your clients, suppliers, and/or subcontractors if you breach the contractual obligation laid out in your bond terms. There are thousands of surety bond requirements throughout the US.
What are the four types of bonds in construction?
- 1) Bid Bond.
- 2) Agreement to Bond (a.k.a. Surety's Consent or Consent of Surety)
- 3) Performance Bond.
- 4) Labour and Material Payment Bond.
What is the purpose of being bonded?
The Bottom Line. Many businesses get bonded and insured to meet the requirements of a job. Being bonded and insured can also help businesses compete with other companies and build trust with customers and the public. Surety bonds differ from insurance policies in many ways.