CONTRACTORS INSURANCE TIPS

Bonding: Another Way to Protect and Grow Your Company

by admin | June 24th, 2014
Protect your contracting company with an insurance bond

The risk factors in the Construction Industry are unique. Builders not only have risk exposure during the job but also after it has been completed. This risk is increased by the fact that a number of c0-workers are contractors.

Bonding

Bonding is another way of protecting your company. It is also a passport to opportunities for growth. Many jobs require that you be bonded. If you get bonding, then you will be in competition for work that might not have been eligible for.

What You Need to Know About Your Bonding Agent

  • Does the agency do business in the state, where you plan to do work?
  • How many surety companies is the bonding agency licensed to work with?
  • Does the bonding company have A.M. Best Rated and US Treasury Listed Surety Bonds?

Types of Bonds

There are many different types of bonds. These are a list of some generally used by contractors:

  • Contract Bonds-The bond assures that you will meet the terms of the contract.
  • Subdivision Bonds-A local government authority requires this for public work, roads or street lights.
  • Bid Bond-As the name implies, supports your bid.
  • Performance and Payment-Refers to the standards set for the work and covers the eventuality if you fail to meet those standards.

What Data do You Need to Present to Get Bonded

There are certain data that a bonding agent will need, depending on the type of bond you desire.

Contract Bond

  • You need to bring company end-of the year financials
  • Cash Verification for both your business and personal monies. This you can do by presenting the first page of your bank statements.
  • Bank Lines of Credit verification
  • Resumes for key people
  • Reference Letters
  • Accounts Receivable info
  • Contractor’s Application (supplied by bonding agent)
  • Personal Financial Statements for each of the owners and stockholders
  • Contract Status Report- work you have on hand.

Subdivision Bond

  • Request Form for Site Improvement
  • Personal Financial Statement
  • Corporate Financial Statement
  • Letter from the County or City stating the bond requirements, indicating improvements and dollar amounts.
  • Resume or Company Bio, to show experience in development/subdivisions
  • First Page of Bank Statements to show corporate and personal cash
  • Letter from your Bank to prove funding is in place for the project

Sometimes you’re asked to fill out a Request Form for Bid Bonds and Performance and Payment Bonds.

Bid Bond Request

  • Request Form for Site Improvement
  • Personal Financial Statement
  • Corporate Financial Statement
  • Letter from the County or City stating the bond requirements, indicating improvements and dollar amounts.
  • Resume or Company Bio, to show experience in development/subdivisions
  • First Page of Bank Statements to show corporate and personal cash
  • Letter from your Bank to prove funding is in place for the project

Sometimes you’re asked to fill out a Request Form for Bid Bonds and Performance and Payment Bonds.

Performance and Payment

  • Contact info for you and the contractee.
  • Contract Description
  • Contract Price
  • Liquidated Damages per day
  • Completion Time
  • Warrantee Period

Getting bonded takes time and effort. However, it is one effective way to grow and protect your company.

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