You might need a binding guarantee to operate in your industry, either as a construction contractor or as a motor vehicle dealer. These types of bonds guarantee that your clients will get what they pay for according to agreed guidelines. You will be responsible for making things right if there is a problem later on, and clients and customers value that assurance.

This gives your customers peace of mind. They are assured they will receive compensation and will not bear losses if something goes wrong. The two main types of contract bonds are performance bonds and maintenance bonds. Let’s talk about each to get a better idea:

Performance Bond

A performance bond shall be issued to one of the parties to a contract to ensure that the other party complies with the contractual obligations. Usually, a bank or an insurance company provides a performance bond to ensure a contractor completes designated projects.

In the absence of the contractor complying with or exceeding the time limit, he/she will be required for this to be reimbursed by the customer. In case the contractor goes bankrupt or insolvent, performance bonds will also protect the customer. The surety bond company pays compensation under these unfortunate circumstances.

Maintenance Bond

A maintenance bond is a sort of surety bond purchased by an Oklahoma business that protects against defects in materials, manufacturing, and design for the owner of the completed construction project over a specified period that could occur later if the project is incorrect.

They ensure that contractors have complied with the set guidelines (if it’s a construction project), such as state regulations and buildings codes. If there are any problems or defects, these professionals are called by the customers to look after them. In the specified period, the contractor is legally required to fix any issues.

The security company compensates the customer if the contractor fails to oblige. Maintenance bonds are often confused with insurance but are not technically an insurance policy. It guarantees, however, that in a specific period the customer does not incur any costs. The maintenance bond cost is typically 1% of the total bond amount. Factors such as credit score, however, could also be important.

We, at Carpenter Insurance issue both performance bonds, maintenance bonds and other surety bonds with our professional and experienced agents in Oklahoma. During the years we contributed to smooth and timely completion of many projects.