You are here: Home / Archives for minnesota surety bonds

Types of Surety Bonds

April 9, 2012 By

In the construction business with the current economic climate, project managers and government departments are more likely to be more concerned about safeguarding projects against unexpected and rising costs and performance failures than ever before.  Consequently the need and demand for surety bonds continues to be high.

It is important for contractors to know that surety bonds are not insurance but an extension of credit in lieu of putting up cash for the terms required by the owner or named third party.  The  surety company which issues the bond is there to ensure collection if the contractor  breaches the terms of the bond.  Any financial penalty for failure to meet the bond’s terms will be borne by the contractor not by the surety company which will collect that penalty on behalf of the named obligee.

There are basically three types of surety bonds in construction.

  1. Bid Bond - These surety bonds relate to the bidding process and guarantee that if the contractor is awarded the contract based on his bid, he will perform the job for the approved price.  Generally, if the bid winner refuses to take on the job, a surety bond in such case will force the defaulting contractor to reimburse the bid issuer with the difference between the next lowest bid and his, along with any penalty as stated in the bond.
  2. Performance Bond – This type of surety bond is there to ensure that the contractor performs the work as agreed to in the construction contract.  This protects the obligee or owner from financial losses should the contractor not live up to his agreements as stated in the bond.  Again the amount will depend on the wording of the bond.
  3. Payment Bond – A payment bond is there to protect the owner or obligee from liens placed on the project from unpaid suppliers and sub-contractors should the contractor not pay them.  Again, the contractor will be penalized as per the terms of the bond.

Statewide Insurance is there to handle your surety bond needs in Texas, California, Oregon, Minnesota, Virginia and Nevada.  Give us a call today to find out what we can do for you.

Call Statewide Insurance Brokers at (888) 258-0272 today for fast, free quotes on your insurance needs.
Photo credit: pixbox77

Minnesota Insurance Bonds – What You Should Know

July 5, 2011 By

Minnesota Surety Bonds Statewide Insurance Brokers

Working in Minneapolis? Need a Surety Bond? Call Statewide Insurance Brokers!

An insurance bond for any Minnesota work is similar to insurance, but involves three parties instead of one or two. It also is NOT an insurance policy. This type of coverage pays for damages that occur in the workplace or business due to a variety of conditions, such as lack of completion, not meeting standards, and other practices. Insurance is designed to pay for accidents and liabilities but insurance bonds will pay for things that occur that are not accident related. As a Minnesota contractor, you have to make sure that you are protected and that your business is protected, as well. Purchasing these bonds is a great way to do that.

Contractor’s license bonds, also known as performance bonds, guarantee that a job will be completed at a specific time and that performance will be up to par as the customer expects, or that the company will have to give up the bond to the client so that they are justly compensated. An insurance bond is between the client, the company obligated to the bond, and the insurance company that assumes the risk in giving the bond in the first place. When a job is not completed by a contractor, the insurance company then has to pay the client for the terms of the bond being violated.

This is more commonly known as a surety bond, because it ensures that the obligations in the contract will be fulfilled correctly. With an insurance bond, contractors and clients can both feel safer in their working relationship because everyone knows what is expected and what they are getting from the process. In addition to traditional performance bonds, contractors can also be subject to completion bonds, which are bonds that guarantee a project completion date regardless of any extenuating circumstances.

There are numerous benefits of the insurance bond in the Minnesota contracting industry. Because of the reputation that many contractors have gotten thanks to a few bad apples, it is hard for people to trust others working in their home. When you offer insurance bonds to your clients or show them that you’re willing to do whatever it takes, they are more willing to trust you in the end. When you want the work you have to prove it and insurance bonds are the way to do that in today’s world. Unfortunately, old-fashioned trustworthy handshakes aren’t good enough anymore. However, with insurance bonds and the right insurance products, you can be successful as a contractor by proving your trust to clients.

If you are working out of Minneapolis, St. Paul, Rochester, Duluth or anywhere in Minnesota, Statewide Insurance Brokers can help you obtain your insurance bond. Call (888) 258-0272.