Clients expect contractors to complete projects within the specifications of the deal. Contracts require a legal obligation to follow their specifications. They also mandate a very high degree of honesty on the part of the contractor.
Part of your obligation to your client is to protect their financial investment in a project. Carrying the right insurance increases your reliability. Among the insurance you should consider is a surety bond.
A surety bond is essentially an insurance guarantee. You file a bond, and provide the certification to your client. If you cannot complete your work as promised, you compensate the client along the terms of the bond.
A surety bond essentially tells a client that you¸ the contractor, have the assets to compensate them in case you can’t complete your contract.
Think of it like credit. If you can't complete your work, the bond will compensate the client. You might have to provide monetary compensation, or compensation for new services. However, you have to pay the bond company back if they issue a payment on behalf of a bond. That's why you have to have the proper assets before you issue secure a bond.
Preparing to Buy a Surety Bond
Getting a surety bond means that you have to execute a contract to the letter. Therefore, secure your assets beforehand. Doing so will help you complete a project correctly.
- If a client requires you to get a surety bond, make sure you buy coverage that meets the client’s requirements. Clients often stipulate bond requirements. Even if you don’t have to carry a bond, doing so can greatly improve your safety net in the eyes of a client.
- Have your legal representative review contracts. Do not sign a contract without receiving proper counsel. Your counsel can also help you determine special points to consider when applying for a bond.
- If you notice potential problems in honoring the contract, have a transparent discussion with your client. You can often work with the client to make arrangements to better honor your commitments.
- When pitching to a client, always be honest about your concerns. Truthfully explain the costs, timeline, and liabilities associated with the project. Therefore, you and the client can determine how best to execute the contract and surety bond.
The proper surety bond can help you protect yourself in contract work. However, you can honor a contract by taking steps to prepare for it before you start a project.
First Insurance Group has your bond needs in mind. One of our agents can help you get a bond that meets your needs. Call us at (800) 511-2892 for more information now.