Bonds have been used in the construction industry for longer than anyone working today can remember, and it’s no surprise they’ve been around so long because they do a good job of managing certain kinds of risks that would be unwieldy to cover with regular insurance. Not all construction bond contracts are the same, though, and not all businesses need every kind of bond. In fact, it’s often the case that the exact range of bond types and values you need varies from project to project. Understanding the types of bonds out there is the first step to being sure you’re fully protected against industry risks.
Common Bond Types
There are a lot of bands out there, but a few types are common enough to be staples for most projects. Among them are license bonds, bid bonds, and payment bonds. Those three types cover the licensing of yourself and your team, the bids you quote, and the payment of subcontractors during the project. That protects your customer’s costs and your outgoing payments, which goes a long way toward protecting the project as a whole from disruption. Additional bond types may be needed to cover environmental risks, performance, or even maintenance after construction. Talk to a bond professional about your needs to learn more about specific bond types you might be able to use as an alternative to insurance.