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A contractor's bond is a requirement for the issuance of an active license, reactivation of a license, and for the maintenance of an actively renewed license. The bond is filed for the benefit of consumers who may be damaged as a result of defective construction or other license law violations, and for the benefit of employees who have not been paid their due wages.
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How is a contractor bonded?
A contractor typically obtains a surety bond from a bonding company. This bond serves as a guarantee to clients that the contractor will complete the project as agreed. The contractor pays a premium to the bonding company to secure the bond.
What happens when a general contractor is not a general contractor in your state?
That means he is an unlicensed general contractor. He has not set up a bond or registered with the state licensing board. Complaints in your state would not be readily available.
What is contractual bond?
A "contract" bond is a guarantee that has been issued by an insurance company. The contract bond guarantees that the "contractor" will perform a service according to the specifics of a contract.
Would a commercial policy cover losses due to inability to oversee work if a contractor became terminally ill while working on an addition?
More than likely the contractor's insurance policy would not respond as his inability to complete the job is not a covered cause of loss on his liability form. There is a way to protect this exposure, however. Prior to awarding a contract to perform work by a contractor you can require a performance and payment bond. The insurance company will pay the money necessary to hire an alternative contractor(s) in his place to guarantee that the job will be completed. It is important to note, however, that a bond does not work the same way as a traditional liability policy. Where a traditional liability policy will indemnify the injured party subject to any applicable deductibles, a perfomance and payment bond requires the bonded entity to indemnify the insurer once they have met their obligation to the party holding the bond. In other words, the contractor will have to pay back the bond company any money paid to to insure the job is completed. This requires stringent underwriting and the disclosure of much financial information and the contractor's work load, often times requiring the contractor and spouse to individually indemnify the insurance company.
What are the advantages of a performance bond?
A performance bond is used to ensure a customer winds up with a finished product when undergoing a project involving a contractor. An advantage is there is no deductible when using a performance bond, and you have lower premium costs.
What does it mean to bond a job in construction?
The owner who is accepting bids to perform work requires the contrator to purchase a bond which guarantees that should the contractor fail to perform the work the owner can have another contractor finish the work at no additional cost to the owner.
What is a warranty bond?
Warranty bond is guarantee for investor, that contractor will solve all warranty issues in warranty time. If contractor will not solve this issues or will bancrupt, investor has a guarantee from bank and will be compensated in money. Typically this product is used in building constrution bussines.
What is the definition of contractors bond?
Contractor's bonds ensure the performance of work done by a contractor. Contractors bonds are used mainly in the construction industry, and they are in place to ensure that the work will be done properly and to the desired specifications set out by the person who hired the contractor.
What is a payment bond and a Performance bond?
Performance bonds protect the obligee (obligee is the entity requiring the bond)Requiring a performance and payment bond will insure that the project will be completedIf the principal defaults in its performance set forth in the contract to the obligee and the contractor is unable to successfully perform the job, the surety assumes the contractor's responsibilities and ensures that the project is completed. Below are the four types of contract bonds that may be required1. Bid Bond which guarantees that the bidder on a contract will pierce into the contract and equip the mandatory payment along with performance bonds. 2. Payment Bond which guarantees payment from the contractor of money to persons who furnish labor, materials equipment and also supplies for use in the performance of the contract. 3. Performance Bond which warranties that the contractor will hold out the contract in pact with its terms. 4. Ancillary Bonds which are auxiliary as well as crucial to the performance of the contract. Source http://www.integritybonds.com
What is the cost of a performance bond?
A performance bond is a surety bond issued by an insurance company to guarantee satisfactory completion of a project by a contractor. For example, a contractor may cause a performance bond to be issued in favor of a client for whom the contractor is constructing a building. If the contractor fails to construct the building according to the specifications laid out by the contract (most often due to the bankruptcy of the contractor), the client is guaranteed compensation for any monetary loss up to the amount of the performance bond. Performance bonds are commonly used in the development of real property, where an owner or investor may require the developer to assure that contractors or project managers procure such bonds in order to guarantee that the value of the work will not be lost in the case of an unfortunate event (such as insolvency of the contractor). The term is also used to denote a collateral deposit intended to secure a Futures contract, commonly known as margin. Performance bonds have been around since 2,750 BC and, more recently, the Romans developed laws of surety around 150 AD, the principles of which still exist.
If you file bankruptcy do you lose your contractor license?
No, just as long as your contractors bond is still good and active
Who pays a labor and material payment bond?
A labor and material payment bond is typically paid for by the contractor or subcontractor who is required to obtain it as part of a construction project. The bond serves as a guarantee that the contractor will pay for labor and materials used in the project, protecting suppliers and laborers from non-payment. In some cases, the cost of the bond may be factored into the overall project budget, ultimately impacting the owner or developer.
