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CONTRACT BONDS IN VERMONT

Contract bonds are specialized surety bonds that normally provide financial compensation if a contractor doesn’t follow through with a project. Several different contract bonds are available.

These bonds can also be purchased by tradespeople, general contractors, home builders, contractors who remove hazardous materials and utility construction companies.

  • Bid Bonds
  • Performance Bonds
  • Payment Bonds

What are contract bonds?

Vermont contractors take on significant responsibility when they begin projects, and customers can sustain financial losses if contractors fail to complete projects. Contract bonds may provide assurance that customers will be compensated if a contractor fails to deliver as promised.

Contract bonds are specialized surety bonds that normally provide financial compensation if a contractor doesn’t follow through with a project. Several different contract bonds are available.

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Who in Vermont needs contractor bonds?

Vermont contractors who work on larger projects may be required to purchase contractor bonds. Commercial construction companies, large residential developers, and roadwork companies might need them. 

These bonds can also be purchased by tradespeople, general contractors, home builders, contractors who remove hazardous materials and utility construction companies.

What types of contractor bonds are available?

Contractor bonds can be specialized according to the type of company that purchases them.

For instance, general construction, utility construction, road construction/paving, bridge construction and environmental construction bonds are all slightly different. So too are subdivision bonds, supply performance bonds and sub-trade bonds.

 

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These bonds can also be categorized by when during a project they’re used. The same business might purchase several bonds throughout a project, possibly including:

  • Bid Bonds: Usually guarantee that a contractor who bids for a project will indeed enter into a contract for the project
  • Performance Bonds: Usually guarantee that a contractor who signs onto a project will complete the work according to regulations and the contract
  • Payment Bonds: Usually guarantee that a contractor who signs onto a project will pay their workers according to regulations and the employment agreement
  • Maintenance (Warranty) Bonds: Usually guarantee that a contractor who completes a project will provide compensation for any defects in the final work.
  • Supply Bonds: Usually guarantee that a supplier will deliver promised equipment and materials in good condition and on time
  • Subdivision Bonds: Usually guarantee that public property (e.g. roads, drainage systems, sidewalks) will be installed to code when subdividing property

Many of these are required by the customers and governments that hire contractors for major projects.

An insurance agent who specializes in contractor bonds can help businesses find the bonds that they need, and acquire the necessary ones as a project proceeds.

How much do contractor surety bonds cost?

Contractor surety bonds vary significantly in cost. The type of bond, type of project, limits chosen and other factors all impact cost. Even with varying costs, however, bonds are generally reasonable to purchase.

In many cases, contractors must submit business financial information so that underwriters can also consider it. The requested information can include current bank account statements, recent bank account statements, profit & loss statements for two years, and recent tax returns. 

Contractors who can provide a history of successfully completing other projects sometimes can also have their past work taken into account, which might help.

In order to find out exactly how much the contractor surety bonds that a specific project requires will be, businesses can compare rates with an independent insurance agent who knows these bonds well. Comparing rates is generally wise to do before bidding on a project or providing an estimate, as businesses can then build the cost of the bonds into their bids/estimates.

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How can contractors in Vermont get contract bonds?

For help purchasing contract bonds that are needed for projects in Vermont, contact the independent insurance agents of Paige & Campbell Insurance. Our agents are well-versed in bonds and can show you options from several different insurance companies. They have the expertise necessary to help you secure what bonds your business needs at competitive rates.

 

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