What type of bond is most commonly required for contractors to obtain a certificate or license?
A surety bond is commonly required by licensing authorities as a guarantee that the contractor will fulfill their obligations under the terms of the contract. Performance bonds are often required for specific projects, fidelity bonds protect against employee dishonesty, and savings bonds are a type of financial investment.
Who typically pays for the contractor's surety bond?
Contractors are responsible for purchasing their own surety bonds, which serve as a guarantee to clients and regulatory authorities that the contractor will complete their work as agreed. Clients or state boards require the bond, but they do not pay for it.
Which party is protected by a contractor's surety bond?
A surety bond protects the client or project owner by ensuring that they will be compensated if the contractor fails to meet their contractual obligations. The bond does not protect the contractor or their employees directly.
What happens if a contractor fails to fulfill their obligations under a surety bond?
If a contractor fails to meet their obligations, the client can file a claim against the bond to recover damages or costs associated with the contractor's failure. The surety company may then seek reimbursement from the contractor for the amount paid out.
How long does a contractor's surety bond typically last?
Most contractor surety bonds are issued for a one-year term and need to be renewed annually. This ensures that the bond remains active and continues to protect clients and regulatory authorities throughout the contractor's active period.