Different Types Of Bonds You May Want When Hiring A General Contractor

Whether you are doing a major remodel or having a home built, you will be dealing with construction contractors. Finding one that does good work at a reasonable price can be difficult. A good way to get things started is by asking friends and relatives for references and then asking those companies for a quote. However, you should also make sure that the companies are willing to provide you with bonds. Here are a few types of contract bonds you should consider having with the contractors.

Bid Bond

When you talk with a bunch of different companies and are asking them for quotes, be sure to explain that they will be bidding against other companies. Sometimes, a company will submit a proposal for the work but for some reason will not be able to do the job if they are awarded it. This could be due to being awarded other projects that clash with yours, or finding out they bid too low to make a decent profit. However, if you have a bid bond, the contractor will lose the money he or she put up for it if they do not sign a contract and do the work.

Performance Bond

A performance bond is used to guarantee that the contractor will do the work to your specifications. How and when you expect the work to be done will be detailed in the bond. An example would be that the worker has to have licensed subcontractors finish the electrical work by a certain date and that it will pass inspections. If these stipulations are not met, the contractor loses the bond money set for that part of the project or has to have it all redone at no cost to you.

Payment Bond

This type of bond guarantees that the contractor pays all employees and subcontractors. If there were ever a situation where someone wasn't paid, they may put a lien on your home. While you could fight this, it would cost you money in legal fees. A bond proves that you are not to be held responsible for anyone hired by your general contractor.

A company shouldn't feel it is insulting to be asked for these bonds; it is normal practice and should be expected. As long as they do what is agreed upon in the work contract, there should be no issue. If they refuse to have any of these bonds, it could be a sign they are not as legitimate a business person as you want to work with.

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