A Protective Shield for Infrastructure Projects: Surety Bond (Insurance) provides a guarantee to The Obligee (project awarding authority) against non-compliance of contract or non-completion of project by The Principal (the contractor or construction company).
A Protective Shield for Infrastructure Projects: Surety Bond (Insurance) provides a guarantee to The Obligee (project awarding authority) against non-compliance of contract or non-completion of project by The Principal (the contractor or construction company).
Benefits of Insurance Surety Bonds
- No Collateral
- No FD Margin
- Cost effectiveness
- Line of Credit Unblocked
Types of surety Bonds:
1. Bid Bond
2. Performance Bond
3. Advance Payment Bond
4. Maintenance Bond
5. Retention money bond
Advance Payment Bond: It is a promise by the Surety provider to pay the outstanding balance of the advance payment in case the contractor fails to complete the contract as per specifications or fails to adhere to the scope of the contract.
Bid Bond: It is an obligation undertaken by a bidder promising that the bidder will, if awarded the contract, furnish the prescribed performance guarantee and enter into contract agreement within a specified period of time. It provides financial protection to an obligee if a bidder is awarded a contract pursuant to the bid documents, but fails to sign the contract and provide any required performance and payment bonds.
Contract Bond: It provides assurance to the public entity, developers, subcontractors and suppliers that the contractor will fulfil its contractual obligation when undertaking the project. Contract bonds may include: Bid Bonds, Performance Bonds, Advance Payment Bonds and Retention Money.
Customs and Court Bond: This is a type of guarantee where the obligee is a public office such as tax office, customs administration or the court, and it guarantees the payment of a public receivable incurred from opening a court case, clearing goods from customs or losses due to incorrect customs procedures.
Performance Bond: It provides assurance that the obligee will be protected if the principal or contractor fails to perform the bonded contract. If the obligee declares the principal or contractor as being in default and terminates the contract, it can call on the Surety to meet the Surety’s obligations under the bond.
Retention Money: It is a part of the amount payable to the contractor, which is retained and payable at the end after successful completion of the contract.