Sometimes construction projects may run into regrettable snags. For example, financial issues may arise when the contractor fails to complete a project on time or meet contract specifications. Fortunately, construction bonds can help mitigate the effects of these types of disruptions. So, what are construction bonds? Simply put, they are a type of surety bond within the construction industry used to protect companies against unplanned interferences or delays. If you’re not familiar with construction bonds, then here are a few things to consider before you begin your next project.
According to https://www.danielsinsuranceinc.com/, Contractor License Bonds are required by the state before you begin work on anything. These bonds ensure that all required licensing is complete before the project’s start date. If contractors aren’t adequately licensed, you may be liable for any penalties, fines or legal action incurred on the site. Contractors must also obtain Payment Bonds on projects exceeding $100,000. This requirement applies to both residential and public projects.
Many other bonds are optional; however, they could still benefit your next construction site. Some of these voluntary bonds include:
- Bid Bonds – ensure the contractor stands by the awarded contract amount.
- Subdivision Bonds – require contractors to begin work on subdivisions appropriately and within existing streets, sidewalks and waste management systems.
- Performance Bonds – guarantee the completion of a project within the specified timeline on the contact.
- Supply Bonds – ensure contractors obtain suitable supplies and materials.
- Maintenance Bonds – protect the project owner from design imperfections and other failures.