Construction spending in the U.S. reached $1.6 trillion in 2021, according to data from the U.S. Census Bureau. As opportunities arise, setting your business apart becomes more important than ever. Rather than investing in new equipment or pumping up your advertising budget, being bonded and insured is a quick and relatively easy way to qualify for (and ultimately win) more bids.
Surety bonds for construction is an agreement between an owner, contractor, and a surety to guarantee compliance, payment, and performance. They give your prospective customers greater confidence in working with you because they ensure the project gets done and all bills are paid—even if you can’t complete it due to unforeseen circumstances. Here are three reasons to secure surety bonds from an Acrisure Agency Partner.
1. Bonds Built for Your Business
Our Partners understand your construction business along with the unique opportunities and challenges operating in this industry presents. That’s how they are able to determine the precise type of bond support you need. Whether you are looking for a comprehensive bond program or a single bond for a specific bid, performance or payment, a specialized bond agent will work by your side to ensure you fully understand your options and the requirements for each. Generally speaking, a construction project will require a mix of bid, performance and payment bonds. Here are the five most common surety bands for construction:
- Bid bonds guarantee that you will actually accept the job upon winning the bid. Federal law requires this bond for all contractors bidding on projects valued at $100,000 or more.
- Performance bonds or contract bonds are a little more complex. They affirm that you, the contractor, will complete the project and abide by applicable laws as well as specific “industry standards.” However, if these standards are not clearly defined, they can potentially open you up to breach of contract—that’s why it’s so critical to work with a surety bond provider who truly understands your industry.
- Payment bonds affirm that you will pay your workers (including subcontractors and suppliers) in accordance with the agreed-upon contract terms.
- Warranty bonds (also called maintenance bonds) are essentially bonds that guarantee post project completion that the workmanship is of standard quality and protects against defective materials. If the project is found to be defective following completion, the bond amount can be used to pay for needed repairs. These bonds typically last one to two years.
- Contractor license bonds are not tied to any specific type of project; rather, these bonds guarantee that you will conduct business in a “lawful and ethical manner” compliant with industry standards. For example, some states require all contractors to be licensed at the state level while others require licensing by certain municipalities. Because of these variances, it’s very important to partner with a surety bond provider who understands your business, including the types of project you pursue and the regions in which you operate.
2. Faster & Easier Bond Approval
The underwriting process for surety bond approval is typically rigorous and time-consuming. Sureties need to know your company, work history, employee organizational chart, strategic business plan, financial statements for the past three years and work-on-hand information just to start the process. As your construction insurance provider, our Partners already have a deep understanding of your company’s financial situation, growth objectives and other important aspects of your business. This allows the team to foresee potential complications and potentially even fast-track the application process.
3. Future Flexibility
A surety bond is only valid for the duration of the underlying contract. However, an Acrisure Agency Partner has your best interests at heart, which is why your agent may recommend writing the bond to extend for a maintenance period (usually about one year). This is specifically designed to insulate you, the obligee, from unforeseen financial obligations in case problems arise or an aspect of the project needs to be re-done.
Trust your surety bond to a provider who truly understands your construction business. Find a broker today for help writing the surety bonds you need to win more bids.
For additional information, please visit our website at Acrisure.com. Products or services identified herein may not be available in all jurisdictions. The information and descriptions contained herein (a) are not necessarily intended to be complete descriptions of all applicable terms, conditions, and exclusions of the policies referenced, (b) are provided solely for general informational purposes, and (c) should not be viewed as a substitute for legal, regulatory, or other advice on any particular issue or for any particular reason. The advice of a professional should always be obtained before purchasing any insurance product or service, and you should not rely on the information provided herein for the prevention or mitigation of risks or as a full and complete explanation of coverage under any insurance policy. While the information contained herein has been compiled from sources believed to be reliable, no warranty, guarantee, or representation, either expressed or implied, is made as to the correctness or sufficiency of any representation contained herein.
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