Contractors and Bonds

A bond is a financial guarantee usually in regard to the performance work.

Contractors doing work for municipalities or government agencies often must obtain a bond that guarantees that work will be completed as agreed. If there is a default, the bonding company responds with a payment.

Unlike insurance, a bond requires that repayment be made to the bonding company after a loss. So, if there is a bond claim the contractor will have to repay the bonding company for the loss.

If there is a chance you will need a bond in the next year or so you should begin now to establish a relationship with a bonding company. You will need to provide financial statements, a list of work in progress, and perhaps personal financial statements. You bond underwriter will act like a banker in reviewing your financial strength and experience.

Work with your insurance adviser early to lay groundwork for your future bonding needs.