Most clients and investor require their roofing contractor a surety bond, particularly a construction bond. A construction bond is required for a purpose of making sure that the roofing contractor will deliver their job completely, without any delay & good performance. These bonds will protect the client or investor from any financial loss due to the poor performance and or delay.
For roofing contractors, especially new ones, one must be knowledgeable about the different construction bonds as you will be providing this to your client. Unlike the insurance where it only is between your roofing company and the insurance provider, the construction bond is between three parties: the principal (you and your business), the obligee (your client), and the surety provider.
These are the most common construction bond:
1. Bid Bond
The bid bond is the assurance of the client that the submitted proposal of your roofing company is accurate and that the services written within will be performed. This bond is usually required for large-scale projects ranging from $100,000. Once the winning bidder did not fulfill the acceptance of the job and/or if there are any inaccuracies in the proposal, the client can file a claim under the bid bond.
The bid bond usually ranges from 5-10% of the total contract value depending on the agreed terms between the roofing contractor and the client.
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2. Performance Bond
This performance bond is the guarantee of the client that the roofing company will deliver its services according to the approved conditions, terms, methodology, and materials. This is also an assurance that the services will be delivered in the presented completion date in the cost proposal submitted in compliance with the quality of the job. Technically, a performance bond will protect the client from any substandard services and products. Failure of complying with the contract requirement, the client can file a claim under the performance bond.
The performance bond usually ranges from 1-3% of the total contract value depending on the agreed terms between the roofing contractor and the client.
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3. Payment Bond
A Payment Bond is a guarantee that the employees, suppliers, and subcontractors under the general roofing contractor will be paid according to their contract. This bond will ensure that all involving parties in the roofing construction process will be paid on time or during the construction phase. This bond will also protect the client whenever the subcontractors or suppliers will go after them when the general contractor failed to pay in a timely manner. A payment bond usually comes with a performance bond. Once the contractor failed to pay its workers, the subcontractor, and the suppliers, they can file a claim under the payment bond.
Payment bond usually ranges up to 3% of the total contract value depending on the credit history of the general roofing contractor as well as its current financial state.
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Now, how do you file a bond?