Understanding Different Types of Construction BondsJoe Murphy
December 13, 2011 — 1,705 views
A builder who purchases constructor bonds is more trustworthy. A person who needs to have a home or office space built will be more likely to work with a bonded builder than one who has not purchased construction bonds. Construction bonds ensure that the construction company does the job that it says it will do and that the job is completed on time.
A construction bond works both ways in that it protects the construction company as well as the client. There really is no reason for a construction company to not have bonds. Even a relatively new company with little or no experience in this line of work can obtain a bond within a week's time.
Following are some reasons why a bonded construction company has an advantage over the competition:
The reason a client is more likely to work with a bonded company is that the bond provides a form of insurance for the construction project. If the project is not finished on time or is not done the way that the construction company stipulated in the contract, then the client will be able to claim remuneration.
A bond will cover any project. It does not matter if the builder is constructing an apartment complex or a small office. The bond will cover both the builder and the buyer for as long as the project takes to be completed.
Construction Bonds is actually an umbrella term; there are nearly half a dozen different types of bonds that will protect both the builders and the client. These bonds cover the project from the beginning stages right through to the end. Following are the different types of construction bonds that a builder will want to have:
Bid Bonds: These bonds are also known as tender bonds. In many cases there will be a number of construction companies bidding for the same project. Providing a bid bond up front shows the client that the bidder is reliable and can be trusted. Such a bond is usually backed up by a performance bond.
Performance Bonds: A performance bond will provide a set amount of money to the client should the builder default on the project. Such a bond reassures the client that the project will be completed come what may.
Maintenance Bonds: These bonds are in effect a contract stating that if the building work is defective, the construction company will make the repairs. Such a bond also ensures that the building company will maintain the building after it has been fully constructed.
Stage Payment Bonds: These bonds, unlike the bonds mentioned above, mainly benefit the construction company. While a construction company may have won a bid to do the job, it takes a substantial investment of money in order to buy the tools and materials needed for any given job. Stage payment bonds provide the money that a construction company would need to get the job going.
Payment Bonds: These bonds are also important. They benefit the company's employees or subcontractors that may be hired. As the name implies, payment bonds provide a guarantee to those that are hired that they will be paid on time and in full. Payment bonds are the only bonds that benefit the people actually doing the work.
The writer is Joe Murphy with extensive experience in a variety of industries through significant transitions. For more information on Construction Bond, visit http://www.easyquote.ie/business-insurance/index.php/construction-bonds-guarantee-bonds