Bid Bonds, Performance & Payment Bonds, Subcontractor Default Insurance (SDI)
The Value of Surety Bonds
The way project owners evaluate and manage risks on construction projects and make fiscally responsible decisions to ensure timely project completion are crucial to their success. Since private owners cannot afford to gamble on a contractor whose reliability is uncertain or who could end up bankrupt halfway through the job, a surety bond is a great safety net for the investment.
What is Suretyship?
Suretyship is a very specialized line of insurance that is created whenever one party guarantees performance of an obligation by another party.
A surety bond is a written agreement that includes three parties:
o The principal is the party that undertakes the obligation.
o The surety company guarantees the obligation will be performed.
o The obligee is the party who receives the benefit of the bond.
Contract (or Corporate) Surety Bonds
Contract (or corporate) surety bonds provide financial security and construction assurance for building and construction projects by assuring the project owner (obligee) that the contractor (principal) will perform the work and compensate certain subcontractors, laborers and material suppliers, as outlined via their contract. Contract surety bonds include the following:
o Bid bonds provide financial assurance that the bid has been submitted in good faith and that the contractor intends to enter into the contract at the price bid and provide the required performance and payment bonds.
o Performance bonds protect the owner from financial loss should the contractor fail to perform the contract in accordance with its terms and conditions.
o Payment bonds guarantee that the contractor will pay certain subcontractors, laborers and material suppliers associated with the project.
o Maintenance bonds guarantee against defective workmanship or materials for a specified period.
o Subdivision bonds make guarantees to cities, counties or states that the principal will finance and construct certain improvements such as streets, sidewalks, curbs, gutters, sewers and drainage systems.
Our contractor clients truly depend on Benton Luttrell for a high level of surety expertise because they know we aim to deliver on their expectations, time and time again. Our Bond team’s unique mix of experience enables us to collaborate and find solutions to even the most complex surety scenarios. Whether you are facing larger projects, company growing pains, or even financial setbacks, it’s very likely that Benton Luttrell has previously helped others in your exact situation. Contact us at 903-482-5255.