How Surety Bonds Ensure Project Completion?

By Akshay Sharma April 24, 2017 Properties

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Surety bonds are gradually becoming a widespread requirement for different projects in a number of states across the US. In practical terms, surety bonds are a contractual agreement between three parties- Principal (party that needs to get bonded), Obligee (the state body requiring the bond) and the Surety (third party that underwrites the bond). When surety bonds are used on projects, they are referred as contract bonds or construction bonds. Most project owners require contractors to acquire surety bonds in order to ensure that they will perform their duties as per the terms and conditions laid out in contracts.

Though, there are a number of different contract bonds available in the market. Some of the most common types of contract bonds are: license bonds, bid bonds, performance bonds and payment bonds. Whichever type of surety bond you require, it will function as a legally enforceable contract that binds together all the parties (principal, obligee and the surety) involved in the contract.

Surety bonds are essential to provide an additional protection to the authorities and clients from contractor’s non-compliance. In case a contractor fails to comply with the terms and conditions of the contract, a surety bond claim can be made on their bond. The bond amount can then be used to compensate the concerned parties. All costs are then covered from the contractor by the surety company.

If you are a contractor and looking to get a surety bond, a number of options are available in the market. The quickest and easiest way to get a bond is to look for for a countrywide surety provider online. It is important to note that some surety companies only operate in a few states. Therefore, be sure to choose a surety agency that can issue bonds nationwide. The surety agency must be licensed to underwrite bonds wherever your project might be.

As high risk is involved with construction projects, acquiring construction bonds require much more time and effort than getting any other surety bonds in Florida. To make the process quick and smooth, contractors must keep some of the important information like the financial credentials (including tax records and credit scores), all business licensing and registration documents, list of past projects and valid references from project owners and surety providers that they have worked with in the past, ready before applying for surety bonds.