Contract Surety Insurance – Newfoundland and Labrador
As a business owner, you may need to purchase a surety bond when entering into a contract. Suppose the unexpected happens and you’re unable to fulfill your contractual obligation. In that case, a surety bond will protect the third party from the financial impact of the inability to complete the terms of the contract. With the many unknowns of owning a business, don’t let entering a contract be one of them. As a business owner, we know that you wear many hats, so let us look after your insurance needs so you can focus on what’s most important.
We understand it’s vital to protect what’s most important to you and your business. Our expert insurance advisors are here to ensure you’re protected and provide peace of mind so you can focus on nurturing your business for the future.
Why Choose Westland?
We know that your business insurance needs to match your goals, your business and your budget. Our expert business insurance advisors get to know you and your business, so that they can tailor a policy to your exact needs. We’ll work with you to build a risk management solution, ensuring coverages line up with your business needs.
Insurance can be complex sometimes. Let our expert insurance advisors do the heavy lifting! We’ll help you find a policy that you feel is the best fit and provides peace of mind. To learn more about the benefits of being a Westland client, Click here.
Contract Surety Bonding Insurance Explained
A contract surety bond is a unique relationship between a contractor, project owner, and surety company, facilitated by your insurance broker. Regardless of the scope of the construction project, contract bonds ensure the obligations made as part of a construction contract will be met.
No matter the industry, our business insurance advisors can quickly determine the risks your business may face and the potential financial losses that can leave your business in a vulnerable position.
Typically, general contractors, construction companies, and government subcontractors use this type of bond when completing commercial and government real estate projects.
A contract surety bond will relieve the project owner of the risk of a financial loss if there is a failure on the contractor’s part to complete their obligations. This can be the case for many reasons, but the more common reasons are:
- Managerial Issues
- Inadequate job costing or project management systems
- Changes to key personnel that impact the progress of the project
- Changes to business strategy that impact work in progress
- Too much growth too quickly, putting pressure on financial and human resources
- The project was out of scope for the contractor
- Labour & Materials Issues
- Shortage of labour to complete the project
- Material changes to the cost of input products due to scarcity, tariffs, etc.
- Unrecoverable cost escalations
- Uncontrollable Factors
- Severe weather causing delays
- Unexpected economic failures
- Changes in the job site conditions
- Death, illness or departure of key employees
- Labour shortages or difficulties
- Difficult contract terms or working environment
Any one of these factors can cause a delay in meeting contractual obligations within the agreed-upon scope. A contract surety bond offers financial protection for third parties for any of these types of problems that can come up.
There are two main types of surety bonds. The type of bond you require depends on your current situation, but in many cases, contractors may need all three of the following:
- Bid Bond
A bid bond provides your guarantee that, when bidding on a project, the bid has been submitted in good faith. It is the full intention that if your company is selected as the successful bidder, you will assure the pricing you have provided and will provide necessary performance and payment bonds when necessary.
- Performance Bond
A performance bond is precisely that – a guarantee that your company will perform the duties and responsibilities as outlined in the contract. If you cannot create work as described or meet timelines, your inability to perform will cost your customer money in financing, perhaps late penalties, lost revenue, and more. A performance bond gives your customer the protection they need to avoid the financial loss because of your inability to fulfill the contract.
Bond issuance is based on many factors, but in short, a good relationship between you, the contractor, the bonding company, and your insurance broker is vital to continuing with large-scale projects. Most companies will need to “prequalify” for bonding so that when the perfect job comes available, they can enter into a bid quickly with confidence in their ability to perform the work. Going through prequalification for bonding can ensure you have a complete handle on the KPI’s that drive your business forward, such as:
- Capacity to Perform Tasks
- Financial Strengths
- Company History
- Organizational Structure
- Continuation Plans
- Current Work In Progress
- Good Character
- Experience in Matching Contract Obligations
- Financial Stability
- Good Credit History
- Solid Banking Relationship
- Line of Credit
- Has Equipment & Resources to Carry Out the Contract
How Much Do Contract Surety Bonds Cost in Alberta?
Just as businesses differ across Alberta, so do the risks and exposures which impact the cost. The following factors will impact the cost of your contract surety and bond coverage:
- Value of the Project
- Duration of the Project
- Type of Work
- Government vs. Private
- Type of Bond & Percentage of Contract Amount
- Annual Fees
Review Your Insurance and Get a Quote with Westland
Ready to discuss your insurance needs? Our expert advisors are here to review your current insurance policies, discuss your unique risks and operations, and find the perfect insurance policy for your business. Whether it’s over email, the phone or in person we are ready to help! To get started on a quote now and see price estimates for your business coverage, click the button below. Our advisors will contact you right away and help navigate your risk management needs. Of course, we are always available to talk over the phone or in person. Check out our locations page to connect with an office closest to you!