Why On Earth Do You Need Surety Bonds If You Have Insurance?

If you are a professional contractor, you must build a comprehensive insurance portfolio to protect yourself from potential lawsuits and losses. Building an insurance portfolio with general liability, professional liability, building property, business property, and workers compensation, may not be enough to satisfy the state laws of Michigan or the requirements of your potential clients. When you are in the process of bidding for contracts, you must research the importance of carrying surety bonds Michigan. Once you understand the difference between each type of surety bond, you can make a wise investment for the reputation of your business and your career in the industry.

When you obtain your contractors license, the state will require you to secure a contractor license bond. A contractor license bond promises the state that you will satisfy all requirements to keep your license in the state of Michigan. This includes continuing education, meeting state codes and regulations, and staying financially stable. If you do not provide a contractor license bond, you will not be able to finish the licensing process. Not only are you protecting your reputation a professional, you are protecting the consumer from any wrongdoing you or your company may do unintentionally.

There are also contractor surety bonds Michigan that are designed to protect the client during the bidding process. When you bid on a job the bid bond will act as a guarantee that the contractor will accept the job if the client chooses their bid. This protects the consumer against low-ball bidding and will protect the contractor against clients changing their minds and going with another contractor. Many large project owners will require contractors to carry a bid bond. Be sure to consult your insurance agent and receive a quote before bidding on the project.

A performance bond is the last type of bond needed to secure a job. Performance bonds will guarantee your performance on the project. This means that you are promising to meet deadlines and perform the work stated on the contractual agreement. If you fail to meet the expectations of the client, they will be backed by a surety bond. The insurance company will pay the client for financial losses if it is proven the contractor did not meet their obligations stated on the bond and the contract.

Commercial insurance for contractors does not provide protection for any of these situations. If you want to ensure you are protecting the reputation of your professional contracting business, you must invest in surety bonds Michigan. Surety bonds are not insurance policies. While insurance agents do sell bonds, they do not fall under the category of commercial insurance and may require a credit check. If you want to build a larger client base, secure bonds and show you are concerned with protecting the client.




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