There are many different forms of protection that contractors will need if they are to minimize their liability. Unfortunately, those that are new to performing independent contracting work may not have a thorough understanding when it comes to investing in some of these types of protection. More precisely, the need to purchase surety bonds can be a topic that new contractors may need to learn more about.
What Makes A Surety Bond Different From Liability Insurance?
While you likely have liability insurance and workers compensation policies, it is important to note that a surety bond will be very different from conventional insurance. These bonds may be similar in the sense that they will pay your clients in the event that you cause damage to their property. However, they will differ from insurance by requiring you to repay the bond issuer for these costs. While this may seem like a strange form of protection to be required to purchase, these bonds are designed to protect the client by ensuring that they will swiftly be paid for the repair costs needed from your mistake.
What Happens If There Is A Dispute Between You And The Client?
While a surety bond can be an essential form of protection, there can be instances where a dispute may arise between you and the client over the condition of the work you did. These disputes may be an unfortunate issue to encounter, but there will be policies in place by the bond issuer for addressing these disputes. Typically, this will involve the bond issuer dispatching an adjuster to the project site to investigate the matter before a final ruling is issued.
Are There Options For Managing The Costs Of Buying Surety Bonds?
Depending on the nature of the work that you do, it may be necessary for you to purchase a surety for each project that you undertake. While the costs of these bonds will vary from one project to another, there are some factors that can influence the costs of these bonds, and managing these factors can help to reduce the long-term cost of these projects. For example, the professional history of the contractor that is applying for the bond as well as their credit history can be considered. Furthermore, there are some bond issuers that may offer discounts and reduced fees for those that purchase multiple bonds from them, and it may be worth choosing an issuer that offers this benefit.
Contact a company, like NFP, P & C, Inc., for more help.