Why Do Contractors
Need A Bond ?

Throughout our time we’ve noticed that a lot of people have been wondering why do contractors, general contractors, remodelers, and renovators (well anyone in the construction industry really) have bonds? or need bonds?
well it’s time we dive deep into the topic and explain

Why Do Contractors Need A Bond ?

By MegaB | Jun 18, 2018 | Hiring A Contractor |

Throughout our time we’ve noticed that a lot of people have been wondering why do contractors, general contractors, remodelers, and renovators (well anyone in the construction industry really) have bonds? or need bonds?
well it’s time we dive deep into the topic and explain

What Is A Contractor License Bond?

In actuality a contractor license bond is a form of a surety bond – which most businesses needs to have posted in order to operate or conduct any form of business. In the long run a contractor’s bond amount helps not only the contractor, but anyone who would be affected by any costly business decisions. In the incident of any faulty construction / remodeling work the bond is then used to pay for the charges, fixing the damages, making sure what was faulty is fully fixed, and paying any subcontractors hired. Think even further than property damages; bonds also go as far as to protect against legal “damages” in the form of the project that was completed by the contractor not having the proper permits filed.

How Does A Contractor’s Bond Work?

A bond claim is usually filed by the person hiring the contractor in which the damages (at the time of project completion) must be stated, then checked out by the bond issuing agency to make sure the damages are in fact actual. Then the amount needed in order for the fault to be mended is released.

Effective as of January 1, 2016, all contractors are required by law in the state of California to hold a license bond of $15,000 with the Contractors State License Board (CSLB) in order to keep their contractor’s license active. Which is normally facilitated through a surety agency.

In fact, many states in the U.S require contractors to hold a bond amount with the state’s license board for the simple fact that if the contractor failed to fix any damages facilitated by them – which you have brought to their attention, by the time of project completion (or time allocated to fix caused damages), you can file a claim with their bond agency for the funds needed in order to remedy the damages.

In fact, many states in the U.S require contractors to hold a bond amount with the state’s license board for the simple fact that if the contractor failed to fix any damages facilitated by them – which you have brought to their attention, by the time of project completion (or time allocated to fix caused damages), you can file a claim with their bond agency for the funds needed in order to remedy the damages.

Who Does The Contractor’s Bond Help or Protect?

A contractor bond legally protects us – the contractor; you – the client; and the company we have our bond with. Protecting us the contractor, in the means of limiting risks to our business. You the client, with the peace of mind in case something does go sideways there are always means for it to be fixed – with no extra funds needed on your end.

What’s The Purpose Of A Contractor’s Bond?
Why Should A Contractor be bonded?

By having a contractor license bond, the contractor is ensuring that you will always receive ethical and professional services.

 

Contractor bonding also protects the public / client on other levels. Such as us, the ones performing the services, are indicating that we will provide professional services that will do no harm to the business or individual that hired us. In the case that someone does become negatively affected by an unethical decision made on the contractor’s part, They can file against the bond for financial compensation.

A contractor’s surety bond is also used when the a contractor neglected to get the permits needed for the project he / she was hired for. In such a case, legal actions could be taken against the contractor and/or the hiring party (you). Therefore the bond would be used in these instances, covering the amount sued for.  A contractor’s bond amount also goes towards paying any subcontractors that have failed to receive payment for services rendered.

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