Payment Bonds Benefit Contractors

Payment bonds is a surety bond for those working in the construction industry. Surety bonds like this one, guarantee insurance to cover any shortcomings in an agreed upon contract. The surety will cover an amount if the second party fails to meet some part of the obligation. This type of bond is an agreement between three parties:

• The Obligee– party who is a recipient of the obligation (i.e. the client or customer)
• The Principle– party who will perform the contractual obligation (i.e. the contractor)
• The Surety– the party who assures the obligee the principle can perform the task (i.e. the insurance broker/policy)

Payment bonds for general contractors guarantee that its subcontractors and material suppliers on the project will be paid. A payment bond is typically only half of the equation and is often partnered with a performance bond. This bond guarantees the satisfactory completion of a construction project and protects the client against losses in case the contractor can not deliver on their agreed upon service. The two go hand in hand – the performance bond protects the quality of the job and the payment bond secures payment for the job. In order for these bonds to be effective, they must specify the requirements of the job.

Specified Protection for All Construction Fields

There are many different construction fields that insurance providers like Regional Insurance will help to protect.

• Carpenters
• Masons
• Concrete and Cement contractors
• Roofers
• Electricians
• Plumbers
• HVAC contractors

Because no two contractors are the same, nor are the projects they work on, payment bonds for general contractors offer a specificity that is appealing. Avoid a cookie-cutter approach to protecting a specialized trade.

Risk Assessment Analysis

The first step is sitting down with a Regional Insurance broker who will complete a full risk assessment analysis. With a customized insurance plan in place, contractors will not find themselves in a situation where they are overpaying for coverage they simply do not need. There are many specific inclusions you will want to review including:

• Business property insurance, including office contents;
• Equipment, including loss, theft and breakdown of your own equipment as well as short term equipment rentals, leased or even borrowed equipment;
• Fines and damages that are incurred when you can't meet your contractual obligations due to an insured incident;
• Commercial general liability;
• Loss of revenue if your income is affected by losses or damages at a contract site;
• Building material replacement;
• Group accident coverage for your employees.

Payment bonds for general contractors will require specific prerequisites from the contractor that can be discussed with an insurance broker. This process will enable contractors to give their clients piece of mind – that you have taken the time to ensure the work completed will be to a high standard and any unforeseen circumstances that arise are protected with proper coverage.