Obtaining your first contractor bond can feel intimidating, but doing so may be necessary for winning contracts with public and private sector customers. At Kincaid Insurance Group, we have years of expertise helping business owners obtain bonds. This article shares answers to important bond-related questions.
FAQs
What are contractor bonds?
A bond is a contract between three parties. For contract bonds, the entity requiring a contractor to hold a bond is known as the “obligee.” An obligee could be any number of organizations, such as a municipality, utility, or even a private business. The “principal” is the party tasked by the obligee to complete a project, such as constructing a highway. Finally, the “surety” is the institution that offers the bond.
What do contract bonds protect against?
A contract bond helps ensure work is performed to the obligee’s satisfaction. Bonds can be written based on a variety of criteria, including performance, warranties, and job completion. Insurance does not typically cover these exposures.
Are bonds a type of insurance?
No, bonds are not the same thing as insurance. Bonds hold personal indemnification. If you fail to fulfill a contract, commit fraud, or break a licensing rule, the surety pays the obligee for their financial loss. However, unlike standard insurance, you must reimburse the surety for any claims they pay on your behalf.
What types of entities require contractor bonds?
State, local, and federal entities have traditionally required contractors to obtain bonds. Recently, a growing number of private sector companies have begun requiring bonds from contractors and subcontractors.
What is a bid bond?
Issued by the surety, a bid bond tells an obligee that the principal has the ability to be bonded.
How do I get a contract bond?
Provide all requested information (refer to bond checklist) must be submitted. Once reviewed, a project-specific bond or bonding line can be established. Establishing a bonding “line of credit” can speed-up the approval process for future bond requests in the amount of $2M or less in total aggregate limits. Kincaid Insurance Group can assist with the process and, with prompt communication, can typically provide a 24-hour turnaround.
What is required to obtain a home builder bond?
To obtain a home builder bond, there must be a contract and a certificate of financing or proof of financial ability. The warranty period cannot exceed one year.
Request a Contractor Bond
Need a bond for an upcoming project? Contact us to request a contractor bond for your business. Kincaid Insurance Group is based in southwestern Indiana and serves commercial clients across the Midwest.