Most people would not consider a bid bond a type of insurance policy.
However, that is exactly what they are.
Bid Bonds are insurance policies for owners. This type of bond can be requested as part of a contractors bid package when soliciting building quotes for a specific construction project.
The bond requires the bidder to enter into a construction contract with the owner even if the bidder’s quotation is very low. If the contractor defaults and does not enter into a contract, the bond pays the difference to have the next lowest bidder complete the project.
Bonding companies or their insurance brokers study the proposed project that the contractor wishes to bid on. Project value, length of time to complete the project, any special risk concerns and project location are all examined.
Then the contractor is carefully scrutinized before an insurance company will provide a quotation for a bid bond.
The contractor’s past history is reviewed to see if he has successfully completed similar building projects in size and type.
His financial reports are examined to ensure that the contractor has the finances to support the construction project.
Bonding companies may also check out the contractor’s staff – project managers, supervisors, foremen etc. to see what their expertise and qualifications are.
Only after the bonding company is satisfied that the contractor is capable of successfully completing the project will they provide the bid bond quote.
Once accepted by the contractor, a bid bond document is provided to the contractor which is to be included as part of his building quotation to the owner who may also request a copy of the Builder's Risk Insurance policy.
Whether you are planning to build a
prefab metal building or a
conventional steel or masonry building, don't pass on the insurance value
of bonds. It is be a small price to pay for piece of mind!
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