Does your business need contract and construction bonds? These bonds are essential for companies involved in site improvements, bidding on construction contracts, and obtaining or renewing contractor licenses. Just as each insurance carrier sets its own premiums, each surety company establishes its own bond rates. As an independent agency, Commercial Insurance Specialists shops the surety market to secure the Contract & Construction bonds your firm needs at the most competitive rates. Don’t wait—call us today!
What is a Contract Bond?
A contract bond is a legal guarantee that a specific contract will be fulfilled. It is a three-way agreement between the principal (the contractor), the obligee (the project owner or government entity), and the surety (the insurance company). If the contractor fails to comply with the contract terms, the surety guarantees the project up to the bond's limit.
Common Contract Surety Bonds
Depending on the project, your firm may need to purchase one or more contract bonds to guarantee your performance:
Contractor License Bond (CLB)
Required by Florida state or local municipalities to ensure a contractor follows building codes and regulations.
Construction Bond
A financial guarantee that a contractor (principal/obligor) will deliver the construction project according to the contract and that all associated costs will be paid. If the contractor fails, the surety steps in to either find a new contractor to finish the job or compensate the property owner (obligee) for the added costs.
Bid Bond
Guarantees that if the contractor has the winning bid, they will actually enter into the contract and provide the required performance bonds.
Performance Bond
Protects the obligee from financial loss if the contractor (principal or obligor) fails to deliver in accordance with the contract specifications, i.e, delivering substandard materials or poor workmanship.
Payment Bond
Certifies that the contractor will pay all subcontractors, laborers, and material suppliers involved in the project, indemnifying the property owner against costly construction delays and labor disputes.
Maintenance & Warranty Bond
Guarantees that any defects in workmanship or materials found within a certain timeframe after completion will be repaired.
Supply Bond
Guarantee that a supplier will deliver the specified materials or equipment promised in a purchase order.
Subdivision & Site Improvement Bond
Often required by local governments to guarantee that developers will complete mandatory public improvements, such as sidewalks, sewers, and streetlights.
Need a bond that is not listed? Call us today, and we’ll obtain the bond you need at the best rates from our independent network of surety underwriters.
Who Needs Contract & Construction Bonds in Florida?
Florida construction surety bonds are typically required for:
- Public Works Projects: Under the "Little Miller Act," most Florida public construction projects exceeding $100,000 require performance and payment bonds.
- Licensed Professionals: Plumbers, electricians, general contractors, and other professions need license & permit bonds to operate legally in the Sunshine State.
- Subcontractors: The general contractor frequently requires their subs to be bonded to mitigate risk on large-scale developments and municipal projects.
How Much Do They Cost?
The cost of a bond, known as the premium, is typically a small percentage of the total bond amount (usually 3% or less). Sureties determine this rate based on:
- Credit History: A primary factor for smaller bonds and license bonds.
- Financial Strength: For large contracts, the surety will review your company’s balance sheets and cash flow.
- Experience: Your track record of completed projects of a similar size.
