Surety bonds are used by businesses and other organizations in a variety of situations. To meet the various needs that different Massachusetts businesses have, insurers offer several different types of bonds. The following are four common ones that businesses might need.
What Kinds of Surety Bonds Are Available to Massachusetts Businesses?
Bid Bonds: For Ensuring Contract Bids
Bid bonds are primarily used by businesses that get jobs by bidding on contracts. They’re common in the construction industry, where businesses frequently bid on infrastructure projects, but they aren’t limited to that industry. Any business in Massachusetts that submits a project bid might need this type of bond.
These bonds normally provide the organization that collects the bids with an assurance that the bidding business will follow through with their bid. If they win the bid, they’ll enter into a contract that’s in accordance with the bid’s promises. Should the business fail to enter into a contract, the bid bond might offer compensation to the organization that needs the project completed.
Performance Bonds: For Ensuring Contracts Are Fulfilled Properly
Any business that enters into a contract may need to purchase performance bonds. This includes both businesses that win bids and those that enter into contracts without going through a bidding process. Construction companies, major performance companies and vendors sometimes get these kinds of surety bonds.
Performance typically bonds provide a guarantee that the
Payment Bonds: For Ensuring Workers and Suppliers Get Paid
Payment bonds are often purchased by the same businesses that get performance bonds, although a few businesses may only need one or other type of surety bond.
These bonds generally make sure that any workers that a business hires to complete contracted work are paid fairly. While there may be some differences from situation to situation, “fairly” in this sense usually means according to the agreed upon terms and following all government regulations. Federal, state or local regulations can impact how much workers must be paid.
While these bonds might be written so that they apply to lots of different workers, they’re often used in situations where subcontractors and/or suppliers are paid by a business. Although these people might not be employees in the view of the IRS, they’re frequently essential to contracted work. Work may stop if they aren’t paid, which is why organizations sometimes require a guarantee that they will be paid.
As an added benefit, payment bonds might also shield organizations from payment-related lawsuits. Even if an organization doesn’t hire a supplier or subcontractor, anyone who is involved in a project and not paid might try to come after the organization that’s having the project done. Guaranteeing payment through a bond may reduce this risk.
Ancillary Bonds: For Ensuring Things Go Smoothly
While performance and payment bonds tend to cover most of the items in a contract, there are occasionally still items that aren’t covered by these bonds. Ancillary bonds might ensure that these other items, which are frequently subordinate yet essential to a contract, are taken care of.
Ancillary bonds might be purchased by any business that needs a performance bond.
Work with a Massachusetts Agent Who Knows Surety Bonds
To get help finding the surety bonds that your business needs, contact Roger Butler Insurance. Our independent insurance agents are well-versed in the various kinds of bonds, and they can help you compare the various options offered by insurance companies in Massachusetts.