CONTRACTBONDING

Today many construction projects require a bond which falls under the category of Contract Bonds. These bonds include:

· Bid Bonds· Payment and Performance Bonds· Warranty or Maintenance Bonds

They are used to guarantee that the contractors work will be done according to the contract.

To obtain a bond a contractor is required to sign an Indemnity Agreement with the Bond Company, if there is a claim on the bond the bond company pay the bills and then seek to be reimbursed (or indemni�ed) by the contractor for the claim expenses.

PERFORMANCE BONDThis bond guarantees that the contractor

completes the project according to the contract. If they fail to do so the project

owner can make a claim on the bond.

PAYMENT BONDThe type of bond guarantees the proper payment for services in relation to the

contract. The bond amount can be used to reimburse suppliers, subcontractors or

others who worked on the project. Usually Payment and Performance bonds

are issued together.

This type of bonds are used when bidding on a project, they help make sure the

contractors is serious about their bid and it reassures the project owner that the bidders have the financial credentials

necessary for the job. Most bid bonds are at a % of the contract price, usually 5%,

but occasionally 10 or 20%. If the winning bidder declines the job or retracts the bid

the project owner can make a claim on the bond to recoup the difference between

that bid and then next highest.

BID BOND

This bonds guarantee work performed. A Maintenance bond guarantees against

defective materials and workmanship for a specific time period. If the project is found to be defective during the time period the bond can be used to pay for the repairs.

MAINTENANCEor

WARRANTY BOND

This type of bond us required by city, county or state when a contractors

performs work on private property that might spread onto public property. The bond guarantees that the results of the

work will not materially alter the condition of the adjacent public property.

ENCROACHMENTBOND

A Contractors license bond is sometimes required by the state in order to be a

licensed contractor in that state. Some states require all contractors to obtain a license bond and others only require a

bond if the contractor does not meet their qualifications.

CONTRACTORS LICENSE BOND

OBTAINING A BOND

In order to get a contract bond we need to set up a bond line. The requirements vary depending on the size of the bond needed. See the table on the next slide for more details.

Sometimes the requirements may vary depending on a specific job but this will give you an idea of what you need to get started.

Under $250,000

· Bond Application· Good Credit Score· Minimum 1 year experience.

$250,000 -$500,000

· Bond Application· Personal and/or Business Financial Statement

$500,000 - $1,000,000

· Bond Application· Personal Financial Statement· CPA Prepared Business Financial Statement

Over $1,000,000

· Bond Application· Personal Financial Statement · 3 years of CPA Reviewed Business Financial Statement· Bank Line of Credit Information· Work in Progress Resumes on Owners

Visit our website for more information and to print documents to get started on your bond line.

http://www.certi�edinsurance.net/services/construction-bonds/