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October 11 2014


Information on What Surety Bonds Are and Why They're Needed

Professionals are hired every day to repair, replace or install equipment in or on the home. These are usually contractors who've been hired to put a roof on the home or called in to install a septic system, renovate a home, build roads, install furnaces and air conditioning, just to name a few. Any professional could be required to be bonded. Anyone searching for a good company bid bonds online has viewed websites calling attention to certain companies who want to gain a customer's trust. In the article, a sentence states, "Every technician with our company is licensed, bonded and insured."

What does this statement mean? It means that if you're a business person you'll be required to purchase a bond that protects your customer or client if you renege on a service they've paid you to do for them. Many people in business think that when they're bonded, they're the one protected, when it's actually the public who is protected should they fail to do things right or not do them at all. Everyone has heard on the news about scams on unsuspecting elderly when they hire a home improvement company, that's not bonded, to do work for them. They pay the entire amount for the improvement and the company skips town taking the money with them.


This is why it's so important to know which contractor will be doing your work and which bonds they have, whether they're bid bonds, performance bonds, license bonds or payment bonds. The bid bonds and performance bonds are usually posted together because a promise has been made on price and completion. When a bid is placed on a job by the contractor to do the job for a certain amount and that bid is accepted, the owner of the property is assured the job will be completed at that price.

There are license and permit bonds that protect a customer in just about every business you can name. From insurance brokers, health club owners, hunting license bonds to pre-need funeral bonds, and many more. One very important detail to make note of is that you never want anyone to file a claim stating you didn't do work as you said you would. You have paid a small amount to be bonded, but if a client files a claim and wins, you'll be required to pay the entire amount of the claim.

The bond language seems confusing at first. An Obligee is a project owner (wanting work completed) and requires a bond be posted in case the work is not completed by the Principal (contractor going to do the work). When customers are treated the right way, rules are followed to the letter and the job is completed when stated, there won't be claims unless they are fraudulent. Remember, also that there are two sides to every story and your bond insurance company will also listen to your side to resolve the issue.
Tags: payment bonds

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