Contractor Bonds

When you need surety bonds for construction related applications, we can help.  Contractor surety bonds are oftentimes a neccesary part of doing business when building new projects or bidding commercial or government work.  Depending on the type of surety bond being requested, some types of bonds can be easy to obtain like contractor license bonds or small payment and performance bonds under $150,000.  Others can be difficult and complex such as large payment and performance bonds over $1,000,000, or subdivison improvement bonds.  We write all kinds of surety bonds for our construction clients and have multiple relationships with leading surety carriers in the industry.  Surety is tied closely to credit scores and financial underwriting.  Establishing a bond line or finding a particular type of bond can be challenging at times.  We have access to carriers for clients with blue ribbon credit and not so perfect credit.   Even if our carriers can't provide you with a bond, we have the expertise to refer you to direct programs that can provide hard to place bonds for even the most difficult to place risks.  


What are Contractor Bonds?

Contractor surety bonds are a contract between three parties: a contractor (principal), the entity requiring the bond (obligee), and the company backing the bond (surety). The purpose of a surety bond is to guarantee you fulfill your contractual obligations under a written agreement or contract. As a contractor, you may need a variety of bonds to run your business starting with a contractor license bond.

Contractor License Bonds
Contractor license bonds are required in most states. Contractor license bonds are a guarantee that you will operate your business according to the rules and regulations of your state license board.  If you want to obtain a new license or renew an existing one, we can get you a contractor license bond quickly and easily so you don’t miss out on a single job opportunity.

Contractor Bid Bonds
Bid bonds are used to prequalify bidders and screen out bidders who are not quaified to bid the proejct. The process benefits both project owners and contractors serious about winning the bid.  Bid bonds are often required to bid on public projects. If you are awarded the contract, it will roll over into a performance bond. The surety underwrites the bid bond guaranteeing that you can qualify for the performance and payment bond if awarded the contract.

Contractor Performance and Payment Bonds
A performance bond assures that a contractor will perform a contract according to its terms; completing a project at the price and within the time agreed. This protects a project owner, who can collect on the bond if a contractor doesn’t finish the job.  A payment bond guarantees payment of all subcontractors, materials suppliers, and laborers in order to keep a project free from liens upon completion. A payment bond protects a project owner from being liable for unpaid materials or labor.

Subdivision Improvement Bonds
Also sometimes referred to as site improvement bonds, the owner developer (principle) has to pay the cost of building the bonded improvements rather than the public agency (obligee). The public municipality usually requires the developer of real property to post financial security to guarantee the completion of the designated improvements as a condition precedent to granting a construction permit. The bond guarantees the developer has the resources to pay for the improvements, guarantees the improvements will be built within a specified period of time, and requires the developer to maintain the improvements for a specified period of time against defective workmanship or materials. This latter part is oftentimes referred to as the subdivison maintenance bond. 

Other Types of Contractors Bonds
There are many other types of bonds contractors may come across during the course of their operations. Whether you need a bond for encroaching into the public right-of-way, or want to bond around a lien, or need a crime bond because your employees will be doing renovations in a state office building after hours and the state wants to make sure the employees are bonded for theft, we can assist. We write all types of construction related bonds and have the facilities to assist you with what ever type of bond request comes up.  


What You Should Know about Bonding

When pursuing bonded work, it is important to understand that the surety is guaranteeing your contract by issuing a bond on your behalf. A bond works very similar to how a loan works in that there is a significant amount of financial analysis and account underwriting. The surety evaluates your credit risk and your ability to pay back the bond amount if there is a default on the bond.  When bonding a job, you will have to sign a general indemnity agreement referred to as a GIA. If there is a default on a surety bond, the surety company will try to recover any amounts paid from the indemnitors on the GIA. An indemnitor is generally anyone that has more than 10% ownership in a company. The difference between insurance and bonding is with insurance you don't have to pay the carrier back for damages resulting from a claim. With surety bonding, you always personally guarantee the work you have bonded and this guarantee survives the entity that is the "Principle" on the bond. 

Time is money on a construction project, so if you need surety bonds for a project, or you have a tight bid deadline, you should work on getting the bonds set up early. Beach & O’Neill Insurance Associates can assist you with understanding the bonding process and the underwriting process in order to place complicated bonds. If you need a contractor's license bond or small payment and performance bonds, we have expedited facilities ready to quote your business fast. Oftentimes we can turn small payment and performance bonds around in a a few days, and license bonds are usually done same day. Please give us a call to discuss your unique bonding needs.