California Surety Bonds
What is a Surety Bond?
A surety bond is an important part of many construction projects. Being vital to doing business as a contractor, it’s important to understand what surety bonds are and how they work. Here at Commercial Surety Bond Agency we invest in California contractors and endeavor to see them grow. As part of that effort, we work to improve the financial literacy of those in this industry by making available necessary information, such as with California surety bonds.
A surety bond is a three-party agreement that legally binds the principal, an obligee, and a surety company. The principal is the contractor who needs the bond, the obligee is the project owner or general contractor who requires the bond, and the surety company provides the surety bond service.
How Does a Surety Bond Work?
Essentially the bond guarantees that the principal will fulfill the obligations of the contract. If they fail to do so, the surety bond will cover the damages and losses. The simplest way to put this is that if a contractor doesn’t complete the project or pay their subcontractors, vendors, or laborers then the surety bond will pay via a claim made.
You’ll likely find a surety bond is required for public construction projects using tax dollars. Having this condition for bidding on a job helps protect taxpayers as well as those working on the project.
If you have any questions about our California surety bond services or wish to partner with CSBA for your contractor bond needs, we invite you to contact us.
Surety Bond Requirements
Surety bonds for construction projects, such as bid bonds and performance and payment bonds, have fairly similar requirements , and in general, surety bond requirements revolve around:
- The contractor’s experience
- The financial capability of the contractor’s business
- The track record of the contractor
- The ability to handle the project a contractor is being bonded for
To explore each of the factors surety bond companies look at for each particular bond, we encourage you to visit the individual bond pages for more in-depth details.
Where Should California Contractors Get Bonds?
Where California contractors go for their bond needs may not seem like an important decision, but the cost of missed opportunities for projects due to a poorly executed bonding process can have big consequences resulting in lost revenue and profit:
An Insurance Agent
Some insurance agents may be able to get you the surety bonds you need for a project, but they often don’t have the professional experience to create a smooth bonding process. An insurance agent isn’t professionally dedicated to surety bonds, and that lack of knowledge can cause the process of getting a surety bond to be much slower and more cumbersome. With their expertise being in other areas, insurance agents aren’t able to form the same quality relationships with surety companies or have the industry connections that a dedicated surety agent can to help a contractor get better premiums and larger bonds
A Surety Specialist
Surety agents are surety bond specialists, handling bonds exclusively. Due to this professional dedication to one thing, they are able and driven to form good working relationships with surety providers and can better match California contractors to the right surety company for their business and what it needs. These relationships also give surety agents access to special programs, making premiums lower and enabling them to provide unique resources that help to grow bonding capacity, as well as grow your company.
As a surety specialist, we at CSBA are dedicated to our contractors success by helping them navigate the bonding process and achieve their goals.
The three most common types of surety bonds are:
No. You don’t pay month-to-month for sureties. When you are quoted a price for a surety bond, you make a one-time payment.
Applying for a surety bond, no matter the sort of bond, is to contact a surety agency. For instance, you can reach CSBA here to get started on obtaining your surety bond.
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