In order to reduce the risks associated with construction projects, stakeholders may require that contractors and subcontractors are properly bonded. Bonds ensure that contracted companies are ethical, dependable and operate within contract guidelines.
There are four main types of contract bonds:
- Bid bond – Holds the contractor responsible for fulfilling the tasks associated with the submitted bid.
- Performance bond – Protects project owners from financial loss in the event that a contractor fails to fulfill contractual obligations.
- Payment bond – Assures that supply costs and subcontractor payments are the responsibility of the contractor.
- Maintenance bond – Assigns facility upkeep, maintenance and repairs to the contractor for a designated amount of time following project completion.
Commercial bonds provide protection to consumers by ensuring that businesses adhere to consumer protection laws. Also called “no-contract surety bonds,” commercial bonds come in various forms, each of which are specific to a particular industry or business sector. These bonds are oftentimes prerequisites for obtaining licenses, and the cost can vary based on terms, risk, and a company’s professional and financial history.
Plaintiffs, defendants or fiduciaries in legal cases may be required to hold a court bond. Court bonds are ordered by the courts themselves to protect against losses associated with case outcomes. There are two main types of court bonds—fiduciary or probate bonds, which apply to court-appointed executors, and judicial bonds, which apply to civil cases.
Contract and commercial bonds protect project owners and stakeholders. They also help contractors establish themselves as trustworthy entities and can help increase referrals and solidify their reputations within the industry. Contact Beaty Insurance at 409-886-1351 for more information.