In the construction industry, surety bonds are required. Surety bonds in Florida protect project owners on their investment. Before beginning on a project, project owners will usually require a contractor to secure a surety bond. The surety bond guarantees that the contractor will fulfill their obligations according to their contract, and if not, the project owner will be reimbursed for their losses.
Why is a surety bond important?
When a surety company (the guarantor) issues a surety bond to a contractor (the principal), they are promising to pay the project owner (the obligee) if the contractor does not complete the project according to the terms of their contract. The principal will be required to pay the guarantor in full. The cost of a surety bond may vary depending on different factors, such as credit history, for the contractor. By doing this:
- The project owner is protected whether the project gets completed or not
- Everyone involved is aware and clear on the expectations of the project
- The contractor can also get surety bonds from sub-contractors or suppliers on similar guidelines to protect themselves