Contract Bonds – Zander Insurance

Contract bonds are an indemnity agreement between a contractor and an insurance company. In layman’s terms, this simply guarantees that the terms of a contract will be met. There are various types of these bonds, some of which are required to perform certain jobs.

What Kind of Bond Does a General Contractor Need?

A general contractor will need agreement with one carrier in place before they can have a bond. Typically, before performing their first job, a contractor will need to reach out to a surety insurance company and provide a list of future jobs for the year to make sure they have enough room to bid on things and bond appropriately. From there, they can begin securing the additional bonds they need to conduct business.

What Types of Contract Bonds Are There?

There are a few different types of contract bonds. The first bond generally needed is a bid bond, which is typically required before a contractor is able to secure a performance or payment bond.

• Bid Bonds: Demonstrates that the contractor has the ability to place a bond if they win the contract.
• Performance Bonds: Guarantees the owner that if the contractor fails, the bond will be called to cover costs.
• Payment Bonds: Ensures that suppliers will be paid for materials and labor; if these conditions are not met, the bond may be called.

What Is a Bonding Rate/Capacity?

The bonding rate is set per $1,000 of the bond amount requested. That rate is typically determined based on the financials of the company requesting the bond. The bonding capacity is amount to which a contractor may bid.

So – What’s Next?

Find out more information about commercial bonds, cyber liability coverage and management liability. We’re here to answer your questions, help determine what you need, and begin the process of getting you bonded. Just give us a call at 1-800-356-4282 to get started.