Finding the Right Contract Bond in the Annapolis Valley

If you are a contractor you need insurance to cover all your risks. This includes standard insurance coverage like commercial property, general liability, and commercial auto insurance. However, it is very important to check out all the contract bond options that you have. This can make the difference between failure and success, and here is a good example.

George B started his own HVAC business ten years ago with very little. Today, he has is one of the top AC and heating contractors in the Annapolis Valley. In fact, George has taken several jobs as a subcontractor working for large construction companies and nine months ago he bid on a major job.

George and his people were to provide heating and cooling systems for a condo development and it meant a lot of money. However, something happened that George and his crew had not planned on. They got started on the job on time and everything was going well. Yet, after the project was about half completed, George was unable to get the necessary supplies he needed. The manufacturer had gone out of business and it was too late for George to change companies. If so, he would have to go through a very time consuming, labor intensive, expensive process. In fact, George would end up losing money on the job.

Under normal circumstances, George would have been in big trouble. He was under contract to complete the HVAC job by a certain date, and he could have faced a lawsuit from the developer. However, this did not happen, because George had an experienced insurance broker on his side. His broker explained to George all about the importance of contractor license bond options and performance bonds, and George took the insurance person's advice. This turned out to be a smart business decision.

What are Contractor Bonds?

Bonds are not technically insurance policies. Someone does not file a claim for damages. Contractor bonds are also referred to as surety bonds. In fact, there are three parties involved in a contract:

  1. The contractor
  2. The person hiring the contractor for services
  3. The surety company

The contractor takes out the bond in case of a default and the surety company makes sure the job is completed.

What Types of Bonds are Available?

Performance bond – this contract bond insures that a particular job agreed upon by a contractor will be completed to the satisfaction of the company hiring the contractor. This is an excellent strategy to guarantee services.

Bid bond – suppose you are a contractor and wish to bid on a particular job. The company offering the job may want some kind of guarantee that you can finish the job. With bid bonds, the contractor puts up a certain amount of money to guarantee the work will be done, and necessary performance bonds will be supplied.

Payment bond – protects your material suppliers and subcontractors. Payment bonds guaranteed that these people will be paid. They are often used with performance bonds.

Supply bond – this surety bond is taken out by a materials supplier. It insures that the supplier will fulfill all contractual obligations. These bonds usually only cover the supplies themselves and not installation services nor labor.

Maintenance bond – sometimes referred to as a warranty bond. This bond guarantees that all maintenance issues will be taken care of by the contractor. It usually covers a certain time period like a year. In other words, if any problems develop, they will be fixed within the first year.

Subdivision bond – if you are taking on a subdivision project for a municipality or local government, they will want assurance it can be completed. This may include:

  • Utilities work
  • Street grading
  • Street improvements
  • Curbs
  • Gutters
  • Sidewalks
  • Storm drains

Site improvement bond – this is like a subdivision bond, but is not about new construction. It insures that necessary improvements will be completed satisfactorily and on time, by a contractor.

Contractor license bond – this is sometimes referred to as a permit bond. It guarantees that all necessary licensing and permits will be obtained by the contractor.

Who Can I Turn to When I Need a Contractor Bond?

Bonds are issued by surety companies and an experienced insurance broker can help you find what you need. Russell Insurance Group Ltd can help you with your bond needs. Because we are independent agents we can get you affordable rates on bonds and business insurance.

An insurance broker is not tied to one company and is there to take care of all the comparison shopping for you. This means we can find the right companies for you. We can provide you with all your contractor insurance needs, and we are there to assist you if you need to make a claim.

Russell Insurance Group Ltd has 5 offices in the Annapolis Valley to serve you. For more contractor license bond information, call our home office today at (902) 847-3274.