Construction Bond is a kind of legal agreement between the contractor (principal) & the project owner (oblige). It is a kind of security for the project being commenced and works as a shield from the beginning of the project till its successful completion. Apart from the scope & size of the construction project, the bond is issued after verifying the track record & financial statement of the service provider. No matter how small or big the project is, this performance bond is mandatory in this competitive business environment for each kind of construction project. A client prefers & trust the contractor who has the successful track record of the projects done & in possession of the performance bond or surety bond or construction bond.
Now-a-days there are various construction bond insurance company which provides these bonds to the contractors. The professional surety team of the insurance companies scrutinizes the applied document of the Construction Company or individual contractors & after having the reliability upon the applicant’s criteria fulfilling the eligibility to complete the stipulated project within the stipulated time, the insurance company provides assurance to the both parties through a written agreement. All the terms & conditions are clearly mentioned in the bond regarding labor, material supply, payment, maintenance of the building after its completion etc. The construction bond insurance company works as a mentor of the both parties – builder & the project owner or client.
These insurance companies levy some charges upon the contractors as the bond issuing fees or processing fees. Under this fee the charges of surety professionals are also included who guide the developer or contractorthroughout the process of documentation, verification and agreement. The team of surety profession cross checks the funding source, references & financial statements & after having fully reliability upon the contractor, the application is proceeded ahead & then the bond is released under the parameters of the state laws of the insurance company. Apart from the processing fees, the developer has to put or represent enough collateral as the security deposit with the bond issuing company.
These companies provide several advantages regarding the security issue of the company’s project. It protects the construction company in case of not meeting the project deadline, financial demand, material supply, labor loss, accidents, mishaps or natural calamities. It is a precaution against the coming hindrances & works as a catalyst in establishing the professional trust of relationship between client & the service provider.