A construction bond is a legally binding agreement between project owners, contractors, and surety companies. In the construction industry, bonds are incredibly common. Bonds are used to reinforcing regulations. Unfortunately, many contractors do not realize what bonds are until they hear their regulations. Here are three of the top three bonds.
Contractor License Bonds
Without a contractor license bond, you may not be able to legally work on a project. The contractor license bond is a guarantee to the project owner that you know all of the applicable laws and regulations and will be able to follow them.
As a contractor, if you do not pay your subcontractors, the subcontractors could go to the project owner and demand payment. To avoid this from happening, you should have a payment bond. This ensures that your subcontractors will receive payment for the duration of a project.
A project owner may request a bid bond. You would obtain the bid bond before you enter into the construction contract. The bid bond essentially guarantees that if you bid on the project and the project owner accepts it that you will fulfill the terms of the bid terms.
Bonds are important in the construction industry. When it comes to protecting yourself, your subcontractors, and the project owner, you should always consider the important bonds.