Surety Bonds And Construction

A surety bond is a type of insurance. For construction workers, it’s used as financial security for a construction or renovation job. If the work isn’t completed for whatever reason, an insurance agency will provide financial security for the losses. The contractor would then need to pay back the surety as well.

It’s a contract that’s signed at the beginning of a project between the construction company, the person who hired the construction company, and a financial institution who will control the transfer of funds.

If a situation arises where work is not completed, it can be difficult to determine is the value of the losses, and whether the losses fit the criteria for the insurance company to pay out. If it doesn’t, a contractor may be liable for the losses. Determining who will cover the losses on an uncompleted project can also affect the payment for any subcontractors hired in order to complete specific or special parts of the project.

This is why it’s critical to have a legal professional review and advise contractors or prospective clients on their surety agreement. He or she will be able to identify any shortcomings or pitfalls within the agreement, and make sure that each party clearly understands what is expected from the other.

What an insurance company pays for can be divided into specific parts, such as performance, and parts and labour. However, it’s important to note that a surety protects against costs associated with the project, not for insuring a construction company itself. That is another type of insurance, and one that an experienced legal professional can also walk clients and contractors through, so they understand the unique protections offered by both agreements.

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