Whenever you undertake a contract, you have a commitment to your client. A contract in most cases is legally binding. That means that a client can often sue you if you fail to complete the work that you promise in the contract.
Failing to complete a contract often means a client loses money. The client might request compensation when you fail to do your work as stipulated by the contract. Many contractors turn to surety bonds to honor the financial stability of the client.
Consider a surety bond your promise to a client to complete a job. If you fail to honor a contract, a surety bond stipulates that you must compensate the client. The compensation may be money, replacement services, and other protection. Bonds may help keep a client from suffering undue losses because of your failure to complete a job.
A surety bond does not provide a payout. It simply guarantees for a client that you will pay them for any broken contracts. Therefore, getting a bond requires that you pay close attention to your needs and the needs of the client. Failing to do so could put both parties at risk in the deal.
1. Understand the Contract’s Bond Requirements
Many clients require contractors to get bonds before they award a contract. This bond will help serve as a guarantee that a client won’t suffer total losses if you can’t complete your work.
The client may lay out requirements that bonds have to cover before they award you a contract. Therefore, it is your responsibility to secure a bond that honors those requirements. Furthermore, your job may come with more risk than the bond requirement. If you feel it is necessary, consider adding extra coverage to the total of your bond.
2. Check your own assets
Bonds do not provide payouts for claims. They simply guarantee a client that you will compensate them in the event of a broken contract. A client files a claim on the bond, which gives you a legal obligation to compensate the client.
Check your own assets before you take on a contract. Make sure you have the financial capabilities to honor a client’s bonds. It may be risky to enter a bond that you cannot reasonably honor.
3. Keep your bond active
While you work on a project, you have to maintain the bond. Make sure that you pay for the bond, and that the bond does not expire during the duration of the project. Failing to carry an active, current bond on a project may result in a breach of contract. That could cause legal problems for your contracting business.
We’ve got you covered. Buschbach Insurance can help you get a bond that will honor your client’s requests. Call us at (708) 423-2350 for more information, or request a fast, free bond quote now.