Before a contractor begins work on a personal home or place of business, a contract is drawn up that details the nature of the job. However, if for whatever reason the contractor cannot meet expectations or complete work on time, the project owner could face financial losses. Surety bonds are designed for this purpose, to assist both client and contractor.
A surety bond is basically a guarantee that the job will get done as promised. If it doesn’t, the company that issued the bond to the contractor is responsible for making up for the client’s financial losses, which in turn prevents the client from suing the contractor. In fact, if the client (also called an oblige) is a government entity, various types of surety bonds may be required before a contractor can even bid on a job.
Purchasing a surety bond shows a contractor’s commitment to acting in a professional, responsible manner; therefore, bonded contractors are highly sought out for work. The boost in business that may follow in some cases can be used to offset the cost of purchasing the bond. But which type of bonds do you need?
A bid bond guarantees that, if awarded the project that was bid upon, a contractor will obtain any other necessary bonds and begin work in a timely manner. A performance bond guarantees that the job will be completed according to the contract. A payment bond guarantees that suppliers and subcontractors will be paid for their contributions to the project.
There are many other types of bonds available across many different industries. Contact your independent insurance agent for details about the types of bonds that are right for you and your profession.
We’re here to help you succeed. Call Texas Insurance Agency at (713) 921-8000 for more information on Houston surety bonds.