What Is a Bonded Contractor?
A bonded contractor is backed by a third-party company known as a surety company. A surety company provides a guarantee of payment to the obligee that the principal will fulfill their obligations.
Before the surety company issues a bond, a contractor must meet the surety’s rigorous process of meeting the pre-qualification requirements. If a contractor successfully obtains one, it is because the surety is confident the contractor can successfully execute the contract.
Why You Should Choose a Bonded Contractor
A surety bond ensures that if something goes wrong with your project, and it’s the contractor’s fault, the contractor’s surety company will step in and handle everything from completing unfinished work to redoing portions of the project that aren’t up to par. This protects your investment in the project and means you won’t have to hire someone else to finish the job.
Bonds also protect you from losses if the contractor can’t execute the contract because of financial issues or a lack of qualified workers.
Because the contractor must repay the surety for any losses, defaulting on a contract would jeopardize their business. So, it is unlikely that they will do so.
Because a contractor must pay back a surety bond if it is ever used, it costs very little to put one in place.
What Is an Insured Contractor?
An insured contractor carries an insurance policy that covers specific claims or incidents. This protects them if something goes wrong. Unlike a bond that requires repayment, insurance does not need to be repaid. As a result, it costs contractors more in premiums, but protects them and the homeowner.
Why You Should Choose an Insured Contractor
Protect yourself by choosing a contractor with general liability and workers’ compensation insurance. If a roofer was to have an accident while working on your roof and the contractor isn’t insured, you could be liable for the roofer’s hospital bill. There is a good chance that your homeowner’s insurance won’t cover it.
While an insurance policy involves the contractor paying a potentially expensive premium, if a claim is filed, they don’t have to repay the insurance company.
Which Is Better? Both Bonding or Insurance
A surety bond generally only covers the contract itself, protecting you from the loss that would occur if the contractor fails to fulfill the agreement.
Liability, should someone become injured on a project and sue the homeowner, can be financially catastrophic. Insurance carried by the contractor covers claims of injury or damage, protecting you from loss. This is a great reason to hire an insured contractor.
You don’t have to choose one or the other. Hiring a bonded and insured contractor offers you the best of both worlds. Since the contractor is bonded, you are protected if they default on the contract. In addition, because the contractor is insured, you won’t be liable for accidents on your property during the project. Most reputable, skilled contractors are both bonded and insured, offering you maximum protection.
Contact Hermann Insurance In Northern Minnesota
At Hermann Insurance, we aim to find you an insurer who delivers. We have been a part of the North Branch community since 1965. We want what is best for you. Contact us today!
