Understanding Construction & Development Bonds
A construction & development bond, also called a contract bond or performance bond, is a type of surety bond, a legally binding contract that guarantees a person or business will fulfill an obligation for someone else. In the case of a construction & development bond, the insurance company is making a guarantee to a client or buyer that a project will be successfully completed by a contractor.
How do Construction & Development Bonds Work?
Let’s say a contractor is about to begin construction on a new office building for a client. The client tells the contractor that they require a construction & development bond, so the contractor purchases a bond from an insurance company. If for any reason the project is not completed, or there is any breach in the contract between the contractor and the client, the client can submit a claim, which the insurance company will investigate. If the claim is valid, the insurance company will pay the client for their losses up to the amount of the bond, and the contractor will then pay back the insurance company. A construction & development bond essentially works as insurance for the client, as well as credit for the contractor.
Contact TRNIA Today
Most large construction projects, as well as all federal government construction projects, require construction & development bonds. There are many different types of bonds, and the bond you need can vary greatly depending on the type of project, the size of the project, and who the customer is. Purchasing the wrong type of bond can be a time-consuming and expensive mistake. At Two Rivers National Insurance Agency, we will meet with you to determine exactly what type of bond you need for your specific project, and thoroughly research any claims to ensure that no false claims get paid. Contact us today to discuss your options.