Saturday, June 15, 2013

Surety Construction Insurance Safe Your Investment

Your investment and surety construction insurance is a three party relationship, these three parties includes the constructor who is also called the principal, the investor who is risking his funds and the surety who takes guarantee on behalf of the principal, to make sure that the principal fulfills his obligation as agreed upon in the contract. In Europe the surety bonds are commonly issued by banks and are called Bank Guarantees and the main purpose behind entering these bonds is to enhance the credibility of the builder. 

These surety bonds also include a term known as the penal sum; this is the maximum amount which the surety becomes liable to indemnify to the investors in case of a default by the principal. The surety charges his premium from the principal after doing the cost benefit analysis of the deal and the past experience with the builder and his
market reputation etc. The party playing the role of the surety in these construction bonds is usually an insurance agency.

Surety Construction Insurance Washington DC

A surety bond is a credit instrument, in other words it can be called as a guarantee bond but it is not an insurance scheme/policy. These bonds entered into to safeguard the bulky investments in huge projects of multiple investors, in big cities these like Washington DC these bonds have become a common feature of construction industry. However the following features must be kept in mind while entering into a construction bond in Washington DC:

  • A construction bond is a three party relation including the constructor, the investor and the surety, the surety takes the guarantee that the constructor shall fulfill his obligations as mentioned in the bond.
  • There are three different types of surety bonds; these include the bid bond, performance bond and the payment bond.The bid bond provides assurance that the bid submitted by the constructor has been submitted in good faith and that he intends to enter into a contractual relation.
  • The surety companies evaluates the expertise and market reputation of the builder and the amount of premium is then charged accordingly
  • Since 1893 the U.S government has required builders involved in the Federal Public projects to enter into these surety bonds and provide guarantee for the completion of the projects and the payment to certain material suppliers and subcontractors etc, this is well known as The Miller Act.
  • These surety are a risk mitigating tool in a risky business like construction, it provides the adequate assurance to the investors about timely completion of projects and within the estimated budgets. It has been observed that the builders are more inclined to complete bonded projects rather than unbounded projects.
 Construction bonds Maryland:

The state of Maryland has a compulsory legal requirement to enter into these construction bonds before entering into any other contractual relationship.

Construction bonds Fairfax

In Fairfax there are two types of construction bonds commonly entered into, the payment bond and the performance bond. Safe and safety with construction insurance.

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