Construction projects are expensive to begin and maintain. To protect the owner’s investment, contractors must often purchase surety bonds. Here are five types of contractor surety bonds in Pennsylvania that protect owners from start to finish of a project.
1. Bid Bonds
Bid bonds guarantee compliance with the contract made with the bid. It can pay the owner up to the full contract price if the bidder cannot complete the project according to specifications or if the bidder backs out of the contract.
2. Payment Bonds
These bonds protect workers and subcontractors. If the contractor does not pay them, the surety bond will.
3. Labor and Materials Bonds
Construction requires quite a few materials. These bonds pay the suppliers if the contractor on the project does not.
4. Performance Bonds
Usually required in conjunction with bid bonds, performance bonds guarantee payment to the obligee if the contractor does not complete the job according to the specific terms to which both parties agreed. It is possible for the owner to recoup 100% of the project’s cost if a claim is awarded.
5. Maintenance Bonds
These bonds protect the owner even after the project is finished. They cover claims made when something goes wrong with the finished project during a certain span of time after its completion.
Contractors are obligated to purchase surety bonds in Pennsylvania so that owners or investors are compensated if anything goes wrong from the conceptualization of the project until after it’s done. Agents can advise contractors about the best bonds to buy.