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What is a maintenance bond?
Maintenance bonds fall under the category of construction, or contract, bonds. The main goal of a maintenance bond is to make sure a contractor remedies any defects or the owner is compensated for any defects that may have occurred throughout the construction project.
Maintenance bonds can protect project owners against:
- design defects
- workmanship faults
- other resulting problems
What does a maintenance bond cover?
Maintenance bonds are only valid for a limited time and only protect against problems that emerge during that time. If a problem arises during the term as outlined in the bond, the obligee can file a claim against the bond. If the claim is valid, the surety will make sure the problem is remedied or else pay appropriate financial compensation up to the bond amount.
While a maintenance bond does not explicitly work as insurance, it instead functions as an insurance policy with the guarantee that any mistakes made by the contractor will be compensated to the owner.
A maintenance bond is not required by law and thus is not utilized as frequently as other construction bond types. These bonds are required at the discretion of project owners who want to protect against defects for a specific time period following a project’s completion.
How is a maintenance bond different from a performance bond?
Often times, a contractor will seek to purchase both a maintenance and a performance bond to cover both the machinery, as well as work expectations detailed in a contract. A performance bond ensures a contractor completes all aspects of a previously agreed upon work project, while the maintenance bond may cover the mechanical equipment related to the contractor’s project.
If a contractor fails to meet the duties listed in a contract, a customer may be entitled to financial compensation covered by a performance bond.
How Much Does a Maintenance Bond Cost?
A maintenance bond cost will depend on how much coverage you need combined with your personal application. Factors that will affect your surety premium include:
- the size of the job at hand and its contractual terms
- the amount of bonding coverage required
- the principal contractor’s time in business and work record
- the principal contractor’s credit score
- the principal contractor’s other financial credentials
Once a contractor starts the process of obtaining a maintenance bond, a credit check will be run by the surety issuing the bond. This protects the surety in case of the contractor having insufficient funds to pay for any claims made.
The higher your credit score and the stronger your financial credentials, the lower your rate will be. Find out what you'll pay by contacting us today!
Note: To qualify for our construction bonding program, applicants must have a credit score at or above 700. SuretyBonds.com can offer $250,000 of single job limit bonding coverage or $500,000 of aggregate limit bonding coverage.