Surety bonds are a contractual agreement between three parties. The issuer of the bond (the surety) joins with the second party (the principal) in guaranteeing to a third party (the obligee) the fulfillment of an obligation on the part of the principal. A typical type of surety bond is a contractor bond.
A contractor bond, also known as a contract bond, covers various types of specific bond – ranging from a supply bond to performance bonds.
A performance bond is commonly found in the construction industry. This type of bond stipulates that the contractor must adhere to the terms and conditions of a contract. A common situation that may result in compensation is in the development of new buildings. A customer is guaranteed to receive monetary compensation should a contractor fail to construct a building as per the specifications presented in the contract.
Typical requirements found in a performance bond are specifying the length of time to develop a building and establishing the total amount of money to be covered by the bond. Usually, the amount covered is a percentage of the overall cost of the contract.
A wide range of contractor bonds are available from most reputable Surety Bonds agents. Most have a fast track service for bonds which have an overall value under $200,000. Whilst a lot of the carriers, which agents use, don’t offer bonds to those with poor credit ratings, they do have access to unique carriers who offer services to those who require a higher risk bond.
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