What is a Contractors Bond?
A contractor’s bond is a financial assurance that a contractor will complete a job to satisfaction. If a contractor fails to complete a job as expected, the agency which issued the bond will provide a pay out to compensate. In many regions of the world, contractors must be bonded in order to obtain a contractor’s license, and consumers should always take care to use the services of a bonded and licensed contractor to ensure that work will be completed to satisfaction. Bonds provide financial protection in the event that a particular job is not performed as desired. If a contractor walks off a job or fails to complete it, the bond would cover this. A contractor’s bond also covers things like unpaid suppliers or subcontractors, damage to the property caused by the construction, and lost or stolen materials from the site. Contractors can purchase a bond from a surety company. The contractor will be required to pay premiums to keep the bond current, with the amount of the premiums varying,
Contractors purchase bonds from a surety bond company (similar to an insurance company). The bond is a guarantee for the contractor’s performance, payment, or both. If you hire a contractor and he does not do his job, you can get money from the surety bond company. If you are a subcontractor or a supplier and the contractor does not pay you, you can get money from the surety bond company.
