Many people have a difficulty in differentiating between a surety bond and an insurance cover. A a surety company is part of an insurance company, but the surety bond is not typical or same as an insurance policy. Although they come from the same company; you are not supposed to mistakenly say that a construction surety bona is the same as an insurance cover.
The type of help that a surety bond offers comes in two ways that are in the private and in the public construction and the private sector it serves to be nature that the financing of the project is smooth from the time it was started to the time that they will finish the last activity. A construction surety bond has three bits of help when it comes to the public sector construction projects, and one is that it makes sure that the contractor pre-qualify for the project, and also it ensures that any subcontractor is paid for during in full and finally it makes sure that the contract financing is smooth till the end of the last activity.
There are benefits that go to the person who enters into a contract with a contractor who has a surety bond, and one of the merits is that the obligee is promised that his or her project will be through within the agreed time frame in the contract. The second benefit is that you are also promised that all your supplies for the construction will be financed regardless of any financial stresses on the contractors side.
To also benefit as the obligee in that you are also assured that in case a loss occurs in your project, you will get full compensation from the bonding company in situations where the contractor is unable to pay.
Another merit to the obligee is that you are always sure that the person who you entrusted your project with has the full financial capability to take care of any risks that met occur. Another thing that you get assurance about is that during the bidding for your project, even the lowest bidder will be able to finish your project within the quoted price.
On the side of the contractor, he or she also benefits from the construction surety bond and one of the merits is that he or she can bid for more tenders and this earns you as the contractor more revenue as a result of the leveraging. Another benefit is that the contractor is bound with surety and he or she is therefore able to get professional advice from people like accountants, lawyers and engineers of the bonding company. Lastly the contractor also benefits in the he or she is protected from any type of dispute that may occur between the clients and the contractor.