Why is it necessary for contractors to be bonded?
In certain places, contractors can work without being licensed or bonded; nonetheless, it is always a good idea to get licensed and bonded. This is due to the numerous advantages of being bonded for contractors. Some of the reasons why you should be bonded are as follows:
- Because bonding can provide clients peace of mind that their money would not be lost if something goes wrong during the project, you’ll have a greater chance of winning contracts. Contractors who are bonded are more likely to succeed than those who are not.
- Bonds safeguard you from financial loss if something goes wrong during or after the project. Because contracting is a dangerous business, it’s best for contractors to carry some insurance in case something goes wrong with a client’s project. In addition, many clients demand contractor bonds before hiring the contractor.
- Bonding is a certain strategy to safeguard your business against damages.
- Some services, such as homeowner’s insurance, are eligible for a discount.
What are the advantages of being a contractor who is bonded?
Contractors who are bonded can make use of additional benefits provided by their bonding providers, such as:
- The surety’s direct referral business
- Corporate bonds or equipment leasing/financing provide capital and financial support.
- Advisory services for businesses
Certain types of contractors are also required by the state in which they work to be bonded. These are some of them:
- Contractors who work on public works projects worth more than $100,000 for the federal, state, or municipal governments.
- Engineers and architects who provide professional engineering and architectural services.
- Contractors who will be undertaking a government contract of $1,000 or more.
- Those who work for public utility companies and railroads.
Is a contractor bond required?
Even if you don’t match the state’s monetary criteria, several occupations require contractor bonds. These are some of them:
- Contractors who provide security services, such as guards, alarm systems, and armored cars. Because most thefts occur within the first 30 minutes after the security provider leaves, homeowners should always check to verify if their security firm is bonded.
- It can be extremely hard for clients to collect damages from property damage and theft if your security service is unregistered and uninsured during this important period. Homeowners must check that not only their own service provider is licensed and insured, but also that the security business they hire has its own bonding.
- Private investigators — because this is a high-demand industry, having a bond with one of the top surety providers will help you land more contracts. For his customers, a private investigator may be asked to deliver services from home or on the road. If he returns with positive findings, he will almost certainly be compensated; however, if issues arise during the assignment, his bond will protect him from losses.
- License revocation or fines are imposed on applicants who falsify information on their applications and licensing board compliance bonds are provided by contractors working for licensing agencies such as medical boards and real estate commissions where licensing violations lead to license revocation or fines imposed on applicants who falsify information on their applications.
What happens if a contractor isn’t covered by a bond?
The contractor will be obliged to stop working immediately if they are detected operating without a bond. The bonding firm may file a lawsuit or even criminal charges against them for violating the state’s code.
They must also be able to settle all claims brought against them by clients who have incurred losses as a result of the contractor’s bad workmanship, material flaws, and other issues throughout their projects.
Bonding your contracting company can safeguard you from financial damage if something goes wrong with one of your projects. It will offer you peace of mind to know that if something goes wrong, there are some precautions in place. Simply select one of the top-rated insurance providers that have your best interests at heart when you become bonded.
Is it permissible to accept projects without first obtaining a bond?
Before accepting any project, contractors must get a bond. Some may attempt to find a way around it, but the danger of being detected and having to pay all claims made against you is not worth it. It certainly pays to be bonded, especially if you’re working on high-value projects with a lot of potential hazards.
Understanding what it means to be bonded is critical if you want to protect your firm from potential financial damages in the event of defective products or services. If you have any more bonding inquiries, contact some of the best-rated surety providers immediately!
Even if you think you can get away with it, the truth remains that you should never gamble with other people’s money and expect them not to sue you for losses caused by your negligence or ineptitude.
Interested to know more about surety bonds? Check out Alpha Surety Bonds now!