What is a contract maintenance bond?

What is a contract maintenance bond?

A maintenance bond is a type of surety bond purchased by a contractor to protect the property owner or landowner from the costs to remedy a completed construction project’s defects.

Is a performance bond the same as a maintenance bond?

Maintenance and performance bonds both relate to the work done on construction projects. A performance bond guarantees that the project will be done according to the contract’s terms and schedule. A maintenance bond guarantees the contractor will remedy any problems related to workmanship, materials, or design.

What is a maintenance or warranty bond?

Maintenance bonds guarantee to the project owner, or “Obligee”, that the contractor or Principal (Contractor) will maintain the project and correct any defective workmanship after the project has been completed based on the agreed terms of the contract for a specified period of time.

What is the cost of a maintenance bond?

Typically, if an applicant has a high credit score, they can expect their bond to cost between 1%-4% of the total bond amount. For a $30,000 maintenance bond, for example, principals can expect a premium between $300 and $1,200.

What is maintenance guarantee?

The maintenance guarantee is an insurance within the works, supply or management contracts in which the insured imposes on the policyholder the obligation to guarantee the quality or good functioning of the work or the service provided.

What are the different types of construction bonds?

The three main types of construction bonds are bid, performance, and payment.

What’s the difference between a payment bond and a performance bond?

The Performance Bond secures the contractor’s promise to perform the contract in accordance with its terms and conditions, at the agreed upon price, and within the time allowed. The Payment Bond protects certain laborers, material suppliers and subcontractors against nonpayment.

Who does a performance bond protect?

A performance bond is a surety bond that is issued by a bonding company or bank to guarantee satisfactory completion of a project by a contractor. It protects the owner in case the contractor fails to complete the contractual obligations.

Who buys the warranty bond?

The principal is the person who obtains the bond (you). The principal takes on the cost of the surety bond, as well as the responsibility to pay for any claims filed by the obligee.

What is performance bond insurance?

A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract. A performance bond is usually provided by a bank or an insurance company to make sure a contractor completes designated projects.

What is advance payment bond in construction?

What is an Advance Payment Bond? It is a guarantee given when money is paid before goods or services are supplied. So, if the client agrees to make an advance payment (sometimes referred to as a down payment) to a supplier, a bond may be required to secure the payment against default by the contractor.

What is extended maintenance cover?

Extended Maintenance Cover – (UIN: IRDAN152A0032V01201718) caused by the Insured contractor(s) in the course of the operations carried out for the purpose of complying with the obligations under the maintenance provisions of the contract.

What is a maintenance bond and what does it mean?

A Maintenance Bond (also known as a warranty bond) is a type of contract performance bond. They are provided as a guarantee that the work completed for a contract will stay in a satisfactory condition for a set period of time after the job is complete.

Do you have to indemnify a contractor for a maintenance bond?

In turn, the contractor must indemnify the surety for any compensation it makes to the obligee. A contractor that seeks to purchase a maintenance bond will have its credit check run by the surety before the bond purchase is approved.

Can a surety provide a generic maintenance bond form?

The maintenance bond form language must be acceptable to the surety, and in instances where the project owner does not have a bond form, the surety can provide a generic bond form. At the end of the bond term, the maintenance responsibility is then usually assumed or transferred to the contract owner.

How is the length of a warranty bond determined?

The length of the warranty is determined by the contract. The contract specified warranty period may be influenced by governing laws and ordinances which can set minimum warranty periods. The maintenance bond term will cover the warranty period specified in the contract. Once that period is done, the bond expires.