Construction Bonds - One For A Specific Need

Construction bonds are an absolute necessity for anyone who is building a home or even just doing a renovation project. A bond is a legal guarantee that your project will be completed as ordered, at the agreed upon price, within a specific time period. There are several different types of construction bonds available and many companies that sell them.

The first type of construction bond is known as the bid bond. A bid bond, sometimes called a tender bond simply means that the contractor will perform the job at the amount they bid on for completion if they are the lowest bidder. This is a way to protect the project owner from having a contractor raise the price for project completion after terms have already been agreed upon. The second type of construction bond is called a performance bond. A performance bond is the project owner's guarantee that in the event of a default by the contractor the funds for project completion are still available. This means that if for some reason your original contractor can't or won't complete the project you will still be able to get the work done because the money is already there. Maintenance bonds are another type of construction bond. Maintenance bonds provide the project owner with a guarantee that the contractor will perform all scheduled maintenance tasks agreed upon in the original contract. This would also cover the costs of having someone else do the maintenance if your contractor fails to live up to their obligation.

Advance or stage payment bonds allow for the contractor to get an initial payment to pay for supplies for the project. This can be very helpful for smaller contractors to help get them started on completing the work. Some companies also allow for payment at certain stages of the project, like at 50% completion, so that the contractor can pay his employees and his suppliers a percentage of what they are owed. The last type of construction bond is known as a payment bond. A payment bond guarantees payment from the contractor to the suppliers and laborers.

Having construction bonds or a licensed and bonded contractor just helps the project owner to have peace of mind that the project will be completed. This also helps to ensure that the project will be completed in a timely manner and within a set budget. Without these bonds projects can drag on for years, and they have also been known to go way over budget. When shopping for construction bonds it is important to use a reputable company and to shop around. There is nothing wrong with a less expensive policy as long as it provides all the coverage that you need, and the company is willing to meet all your needs. Some companies offer twenty-four hour service, and a single person to service your policy. Particularly when dealing with construction having someone available to you when you need them can make a huge difference in getting the project completed. Shop around and you are sure to find the perfect company and policy for your individual project.