Construction Surety Bonds
When a contractor is awarded a project, it’s highly likely that they will be asked to take out a performance bond. It is becoming increasingly common for developers to insist that a bond is in place when negotiating contracts, in order to mitigate the financial risks that come with any construction project.
Sometimes called a surety bond or construction bond, these bonds are taken out to offer the project owner protection should anything go wrong with the contractors work, or if they fail to complete on time.
Quote Chief have backing from reputable construction bond brokers so that you can ensure you have the right cover in place for your business and prove your firm’s good faith to developers.
What is a Construction Performance Bond?
Construction bonds can sometimes be quite complex but to put it simply a construction performance bond can be likened to an insurance policy. If something happens that causes the project owner or developer to incur a financial loss or penalty due to the contractors work, the bond would be called upon.
A contractor will be asked to take out a bond to back up their contractual obligations to their client. In the construction industry there are often financial penalties or losses incurred if a project is completed late or if standards are not met. In the event that specified tasks are not completed to the required standard or if deadlines are missed, the bond is there to pay out an agreed amount to the client to rectify any problems with the work or cover losses caused by late completion.
Surety bonds help contractors convince potential clients that if something were to go wrong, the client will not be hit with huge financial losses. The bond is in place to pay out and soften the blow of any additional costs or penalties the client faces.
How much do Construction Bonds pay out?
When a contractor takes out a construction performance bond they will consult with their client and then agree the value with the company providing the bond. Typically bonds are in place to pay out between five and twenty percent of the total contract value, with 10% being a common figure in the UK insurance industry. However, our specialist advisors will be able to discuss of your requirements in depth so that together you can tailor a bond to suit your firm’s specific needs.
Whether you have a multi million pound development or a small tender job, speak to one of our advisors today on 0161 726 5686 or 0203 916 0057
