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June 14, 2022

Surety Bonds: An Insurance Policy for the Contractor’s Customer

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How can you find a reputable contractor?

References are a good start and online reviews are another. Referrals from a neighbor are another good source that gives a construction company a good reputation, but in the end, the customer has to do their research.

What should customers look for?

Construction companies need a variety of insurance: general liability, commercial property, workers’ compensation, builder’s risk, and inland marine insurance. Each insurance protects the construction company and its employees, and indirectly they protect the customer.

But, it’s the surety bond that makes sure contractors will do the job professionally, according to the contract, and according to federal, state, and municipal regulations. Unlike contractors insurance—which is between the contractor and the insurance company—surety bonds are contracts between three parties: the construction company (the principal), the customer (the obligee); and the insurance company underwriting the bond (the surety provider).

If the contractor does not complete the work properly, the insurance company providing surety ensures the work is done properly. If necessary, they will even hire another construction company to complete the project, then pursue the original construction company to recover their expenses. But you, the customer, will have a project that is completed properly.

Before you take your next leap of faith in hiring a construction company, consider surety bond protection. Contact Koch Insurance Group for more complete information.

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