Contractor bonds are essential in the construction industry as they bind the construction company, the company’s client and the surety together. They are essential for keeping everyone accountable for the agreed upon project. You’ll be hard pressed to find a project that doesn’t require a contractor bond to get on board.
Remember that contractor bonds are there to protect the public, not the construction company, so they can be seen as a bit of a burden for contractors. However, they still help by validating your credibility and setting you apart from the unprofessional competition who promise low prices but fail to deliver. That’s why it’s so important to factor in the cost of a contractor bond with your budget. Here are the key components in determining how much does a contractor bond cost.
Type of Bond
Contractor bonds come in many different shapes and sizes, and the cost largely depends on what specific kind of bond you’re trying to get. Take bid bonds for example. These bonds are required if you even want to be in the running for a contract, so they’re generally less expensive than other types of bonds.
Performance bonds, on the other hand, ensure that a contractor will get the job done correctly. With more at stake, the protection tends to cost a bit more. While a bit bond will typically only put you back about $100, a performance bond can cost anywhere between $500 to $2000. Make sure you know the type of bond you need and the average cost for each before you buy.
Amount of Bond
You get what you pay for, and a bond that covers a greater amount will cost more. This is largely why the discrepancy between bid bond and performance bond prices exists for example. A bid bond just has to cover the cost of your bid which might be a few thousand dollars while a performance bond for an entire project can cover up to millions of dollars.
To get a contractor bond, you have to pay a percentage of what that bond covers. Even if you only have to pay 5% on a performance bond, that’s going to cost you a lot more than 5% on a bid bond since performance bonds cover significantly larger amounts.
Your Reliability
The last and probably most important component in determining how much does a contractor bond costs is you. Surety bonds don’t exactly work like typical insurance, but they still rely on dependability, and yours is determined in quite a few ways. The most obvious is your credit score. The lower your credit score is, the more you’ll have to pay for a surety bond. For example, a bad credit score may have you paying 10% on a contractor bond while a good credit score would drop that to 1%.
Your character is also taken into account. If you have a shady financial history or just seem generally untrustworthy, surety providers aren’t going to put much stock into any contractor bonds you get. That’s why you need to do everything in your power to decrease your perceived risk before you opt for a contractor bond.
Get Your Contractor Bond with NSSI
These are the components we use when determining how much does a contractor bond cost, so you know what to expect. However, we offer the most competitive prices in the industry and base our work on service and results before anything else. When you get your contractor bond with National Surety Services Inc, we act as your partner, not simply your provider. We don’t succeed unless you succeed. Contact us today!