Contractors surety bonds insurance is financial security which assure that a contractor can complete a project as agreed with an investor. In the event that your business were to default on one of its jobs, your client can recover their monetary investment by making a bonds insurance claim.
Yet this type of contractors insurance provides much more than security for your clients. It protects your business so you can remain working.
What Are Surety Bonds?
Surety bonds or contractors surety bonds insurance are a type of contractors insurance that protects the financial interests of project owners who have hired a construction company to complete their venture. Even though it is not always the contractor’s fault, an estimated 26% of builders default every year for various reasons.
In the event a builder does default partway through a project, the owner can file a claim against the contractor’s bonds insurance policy to either be reimbursed for financial losses or negotiate for some other resolution.
What Can Cause A Contractor to Default?
Builders default for many reasons, many of which are unpredictable. Monetary problems such as cash flow issues, financial losses during a project, and even poor accounting are some of the main reasons builders default.
Other common causes include performance problems such as when a builder cannot complete a project as agreed or finish it on time for various reasons. Environmental and economic concerns, jobsite issues, and many other reasons may cause a contractor to default on a job.
Although contractors surety bonds insurance protects a project owner’s interests, it also provides you as a contractor with important business benefits as well. With an active bonds insurance policy, your company will be able to bid on a wider variety of jobs. Project owners will be confident knowing their investment is protected if they choose to work with your company. Surety contractors insurance also provides you with critical assistance from your surety provider in the event you default.
Your provider will investigate any default and act on your behalf if the project owner is the one who actually defaulted, then attempt to make a claim. If the cause of default is valid, your provider will work with you to find a solution other than defaulting and paying a claim, as a default could damage your company’s reputation and its ability to obtain new jobs. Surety providers may provide assistance to your company in a variety of ways, such as bringing in another company to do the work to limit any loss on the project.
To protect project owners while opening more doors for better contracts, be sure to back your services with contractors insurance that includes bonds insurance. Even the best laid plans could have problems that may affect your ability to complete a job. When you have contractors surety bonds insurance, project owners have the assurance that their investment is protected; you have access to important business assistance if you need it!