Guide to Performance bonds
When a developer wants to protect the investment made in a project, the contractor that won the bid is required to provide a performance bond before work can begin. In short, this bond guarantees that a contractor will complete a project according to contract. If the contractor fails to do so, the developer can make a claim to keep from losing money. Often performance bonds are issued in conjunction with payment bonds, and together they are among the most common construction bonds used in the market.
Pay a Low Rate for Your Performance bond
Your premium will vary for a number of reasons such as the project’s bid amount, your financial credentials and your past work history. Qualified contractors who work with us typically pay a rate that’s just 2.5%-3% of the bond amount. This means if you’ve been contracted for a $100,000 project, you could pay just $2,500 to $3,000 for your performance bond.
Apply for Your Bond Today
If your project will be contracted for $250,000 or less, you’ll have to answer the following questions during the application process:
- How much is your bid?
- When is the bid date?
- Have you ever been bonded before?
- How long has your company been in existence?
- What is your personal credit score?
If your project will be contracted for more than $250,000, you’ll have to provide additional financial credentials when submitting your application. Once financial records have been reviewed, the application has been approved and payment has been received, your underwriter will issue the bond.
Get Your Performance Bond Fast
For projects valued at $500,000 or less, our expert surety specialists need at least 48 hours to process applications and underwrite performance bonds. Projects valued at more than $500,000 could require additional time for processing and underwriting.
Learn About Surety Bonds in Construction
The Federal Miller Act mandates the use of contract surety bonds for all public construction projects that exceed $100,000. However, some laws at state, county and city levels mandate their use on public projects that cost much less. Although they aren’t required by law, many private project owners also require contractors to provide contract bonds. As their name suggests, each contract bond binds three entities together in a legally binding contract.
- The principal is the contractor who purchases the bond to guarantee performance quality.
- The obligee is the government agency or other project owner that requires the bond.
- The surety is the underwriter that issues the bond, thus guaranteeing the owner the successful performance of the contractor.
If there is a problem with the project due to inadequate performance, the project owner can file a claim. If the claim is found to be valid, the surety company that issued the bond will make sure the contractor compensates the harmed party. Since this process brings a neutral third party – a surety – in to execute the agreement, it reassures those involved with any project, particularly large and expensive developments.
Apply for your surety bond
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