What are surety bonds and how do they relate to construction? According to the Small Business Administration, a surety bond ensures contract completion if a contractor defaults. They also state that there are four types of surety bonds that relate to construction, which are as follows.
1. Bid Bond: At the beginning of a contract, companies bid on the job. Once the different companies submit a bid, one is chosen to fulfill the contract. A bid bond ensures that the bidder will enter the contract and furnish the payment and performance bonds when awarded the contract. The bid bond helps ensure that there aren't a lot of bids submitted only to find out most of them weren't serious about taking the job.
2. Payment Bond: After the contract has been awarded to a company, that company will need suppliers and might use subcontractors. A payment bond ensures that the suppliers and subcontractors will get paid. Without this bond, suppliers and subcontractors are not protected, and they might sue you for the payment.
3. Performance Bond: The contract was awarded to a company and you want to be sure the job is finished according to the contract. A performance bond ensures that the terms and conditions of the contract will be met.
4. Ancillary Bond: This type of surety bond ensures that requirements that are not directly performance related, but are related to the contract, are performed.
Why do you need a surety bond? If you are bidding on a contract, a surety bond can protect you. If you are having others bid on a project, then requiring them to be bonded can also protect you.
Get the coverage you need. Call Americo Direct Insurance at (214) 374-9997 for more information on Dallas surety bonds.
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