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Bid Bonds with Contractor’s Liability
On the surface, bonds seem like a lot of work to comprehend fully, but how they really should be thought of is more like a testament of your hard work and dedication.
You’ve put in many personal hours to get your business to this point. The only thing standing in the way between you and your bid is a legal documentation requirement. While bid bonds are not required in every state, most clients will require that you have some sort of bond posts certifying that you understand what is expected of you upon taking the contract.
You know you’re a professional, so what have you got to lose? Bid bonds are there to seal your deal, and they are not hard to navigate if you have the right insurance professional on your side. When you work with Contractors Liability, you can feel confident in your business and finish your job according to the standards we all know you keep.
What is a Bid Bond?
Think of a bid bond as a legal promise. It is documentation that proves that your company will complete the task it bid for according to the agreed-upon standards. If the job is not conducted to the standards upon which you both agreed, or if your company backs out of the job, this allows your client to make a claim against you in order to pay for the additional work. Conversely, this bond also covers you if your client breaches the terms of the contract.
Here are some scenarios which having a bid bond might be helpful to you:
- You make a bid on a bathroom renovation. While you are stringent about calculating the other costs, you neglect the request for tile flooring instead of laminate, which puts you over budget for the rest of the project.
- Your client upsets you or threatens one of your workers, causing you to walk off the job and leave part of it unfinished against the terms of the bid
- State law requires you to have a bid bond to make a bid on a construction project
What Parties are Involved in the Bond Process?
As with any other legal document, it is good to define the boundaries of the bid bond. For starters, it’s important to understand which parties (or who) are involved in the bid bond itself. Legal terminology defines the bid bond parties as one of three people:
- The Obligee: This is the legal term for the developer who seeks financial protection for their proposed project.
- The Principal: This is you, the contractor, who is taking out a bond to ensure that your work is completed at the highest quality, per the terms of the agreement.
- The Surety: This is whoever issues your bid bond. While many surety providers are financial institutions, insurance agencies are better versed with the intricacies of insurance law and might be better opted to help you, as they have the specialized knowledge to do so.
What is the Bid Bond Process Like?
One thing setting bid bonds apart from many other types of contractor’s insurance is the process it takes to secure one. As contractors know, a bid generally starts out with a bid packet from the owner. Sometimes, a bid bond application will be included within it, but if that’s not the case, you’ll need to start from scratch. Contacting a licensed insurance agent will get you set on the path toward coverage.
A surety provider will ask questions like the price of your bid, the bid date, your credit score, your bond history, the age of your company, and other clarifiers to help them understand what your coverage will look like.
How Much Will Builder’s Risk Insurance Cost?
In terms of cost, bid bonds are usually straightforward. Most bid bonds cost only $100 forbid coverage. The bond amount, however, is the amount of coverage that the principal is willing to extend to the obligee. In other words, the amount of coverage is usually up to your company. However, low coverage might cost you a bid. Be sure to consult with your insurance agency about determining the right amount for your job.
Why Choose Contractors Liability?
Contractors Liability has the experience under our belt to help you make an impactful and lasting bid that will cover your client should the bid be broken. Our quality advice and bonds enhance business reputation by showing that you are committed to your customer. Additionally, we ensure that:
- The customer is always right. We know it’s a cliché, but we make it a point to prioritize your needs and help you find the coverage you are looking for to get the contracts you want.
- Our customer service includes access to licensed insurance agents who are ready to help you understand the terms of your bonds
- Quotes are available within 5 minutes – easy to fill out
- Coverage happens quickly and seamlessly so that you can move on with more important things
Do I need to have a bid bond?
In most states, there are laws that require contractors to have a bid bond prior to making a bid. If you live in a state that does not have bid bond requirements, that does not necessarily mean that you shouldn’t have this type of insurance. It costs very little to purchase a bid, and if your work is completed per the terms, there is no reason for you to pay the bond amount. This enhances your reputation. In many cases, developers will not give you the time of day without a bid bond, thus having a bid bond at your disposal removes that bias.
Are there any requirements to purchase a bid bond?
There aren’t any requirements per se, but the amount the surety provider will allow you to bond for does have to determine factors for the bond’s amount. Talk to your insurance agent about those determining factors before purchasing a bid.
How can I withdraw my bid?
There are instances in which withdrawing a bid is not only necessary but is also the right option – on both the contractor’s and the developer’s end. If a bid needs to be withdrawn, the contractor or principal must withdraw prior to the awarding of the bid, that way they can receive their bond back.
We know you’re busy planning the other areas of your business, and that’s why we want to help you get the coverage you need to get your projects going. For more information about how we can help you with your bonds, contact us via web or call us at (866) 225-1950 for a 5-minute quote.
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