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Schaedler Insurance specializes in Bid Bonds and other types of contract bonds for California contractors.
What Is A Bid Bond?
A bid bond is generally a three party contract where a financial guarantee (often issued by an insurance company called a surety) for a project owner (the obligee) that a contractor’s (the principle) bid is accurate. In the past some contractors might submit low bids with the intention of walking away from a job after it was awarded if they could not secure more money from the project owner. This event would result in a financial loss for the project owner who was stuck paying more money to the under bidding contractor or opening the job back up for bidding. A bid bond remedies this situation by making sure only qualified contractors are bidding on a particular project. Bid bonds achieve this by showing a project owner that a contractor has sufficient financial resources to perform a particular contract as backed by the surety issuing the bid bond. If a contractor posts a bid bond and does not honor the bid, they risk having a payout on their bond. As with all contract surety bonds, a contractor is responsible for repaying a surety the amount of a claim which may include legal expenses. A bid bond is generally the first bond needed for jobs that require contract bonding and is often followed by a performance bond and payment bond once a project is awarded.
How Much Does A Bid Bond Cost?
Most surety’s charge a flat fee per bid bond that is around a hundred dollars to upwards of a few hundred dollars. Other surety’s will charge a flat rate of a few hundred dollars that will cover all approved bid bonds for the year. Bid bond pricing will vary between all surety’s.
How Does A Bid Bond Work?
When a contractor wants to submit a bid on a project that requires a bid bond, they will complete an application for the project to the surety. The surety is generally looking to make sure the bid amount is in line with expectations based on the project in question. If the bid is too low, a surety may reject the bid bond application. Surety’s generally underwrite a bid bond application with the expectation that they will eventually approve the payment and performance bond that will be required if the contractor is awarded the job. With this in mind, in addition to making sure the bid amount is in line with expectations, a surety will generally evaluate the contractor’s financials to make sure that if they are awarded the job, they are financially sound and experienced enough to see the project through.
Getting A Bid Bond Quote
Getting a bid bond quote from our agency is simple. Just contact our office by phone or use the contact form on the right side of this page and a surety bond specialist from our office will follow to answer any questions you may have and to prove you the appropriate application(s).