Find out what separates construction insurance from surety bonds.
When a client turns to a general contractor in the Bay Area, they are putting their trust in the contractor’s hands. While the client can look at a construction company’s portfolio and look up its client reviews, there is no guarantee that their project will proceed smoothly. This is where surety bonds come into play. These agreements help to establish trust between contractor and client and give concrete expectations that the contractor must live up to. While surety bonds sound similar to construction insurance, they are completely different things. To clarify, here’s how surety bonds are differentiated from insurance.
Construction Insurance
Construction insurance is designed to offer contractors financial protection in exchange for regular premium payments. There are many different types of construction insurance that protect against various risks. Some of the most common policies include the following:
- General liability insurance– covers third-party damage and bodily injuries that a company might be deemed liable for.
- Commercial property insurance– covers repair or replacement costs of commercial equipment, supplies, and other property.
- Builder’s risk insurance– covers replacement of tools or equipment that are stolen from a job site as well as damages when a building in progress is affected by fire, windstorm, or other damage events.
- Inland marine insurance– covers tools and equipment while in transit (particularly mobile equipment like forklifts and bulldozers).
- Workers compensation insurance– cover the costs related to work illnesses or injuries.
Surety Bond
Surety bonds are binding agreements that state that a construction company will abide by the rules, regulations, and laws that govern the construction industry. These bonds act as a means to safeguard clients from poor performance or dishonest behavior. Surety bonds will reimburse a client in the event that the construction company has somehow failed to meet the agreed upon terms of the contract. While construction insurance offers financial protection to the construction company, surety bonds offer financial protection to the construction company’s clients.
These are the main differences between construction insurance and surety bonds. Are you looking for a general contractor in the Bay Area who can ensure that your project will go off without a hitch? If so, then turn to the experts at Proforma Construction. Serving Pleasanton and the surrounding California area, our highly-trained team is ready to make your commercial construction dreams a reality.