Most of the clients and investor requires their roofing contractor a surety bond, particularly a construction bond. A construction bond are required for a purpose of making sure that the roofing contract will deliver their job completely, without any delay & a good performance. These bond will protect the client or investor from any financial loss due to the poor performance and or delay.
For roofing contractors, especially a new one, one must be knowledgeable with the different construction bond as you will be providing this to your client. Unlike the insurance were 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 to large-scall projects ranging from $100,000. Once the winning bidder did not fulfill the acceptance of the job and/or if there are any inaccuracy 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 their 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, performance bond will protect the client from any substandard services and product. 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.
>>Related post: Does My Roofing Services Need An Insurance?
3. Payment Bond
Payment Bond is the 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 supplier will go after them when the general contractor failed to pay in a timely manner. Payment bond usually comes with the performance bond. Once the contractor failed to pay it’s 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 with it’s current financial state.
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Now, how do you file a bond?
- Find your preferred surety bond provider.
- Ask for an application and provide necessary information required. The provider might need for some documents to back your application so you might need to prepare it ahead.
- Wait for the approval. Once you passed through, select your surety bond and review the proposal.
- Pay for the necessary charges, some might just ask for a fraction of the bond.
- Wait for the issuance of the bond and you’re done.