Contractors License Bonds

Written by Michael O'Brien
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Because of the delicate and important nature of a construction undertaking, contractors license bonds are often an absolutely necessary component of the building industry. With so many safety factors to consider and public legal issues, the importance of such bonds becomes quite apparent.

Contractors License Bonds and the Construction Industry

Before even the simplest construction projects can begin, a wide variety of licenses and permits must be obtained. Failure to honor such legal matters or engaging in practices that may endanger the health of workers or the public is an extremely serious matter that could cost a great deal.

Contractors license bonds ensure that a company is indeed fully qualified to be doing what it's doing. If failure to meet required guidelines leads to a loss in time and finances on the part of the person or organization hiring a contractor, then that contractor must make good by taking full responsibility and offering due compensation for that loss.

Where the Bonding Process Begins

Think of a surety company as one who offers credit to a contractor in the event of its failure to do what it is supposed to do. The surety company will absorb that loss at significant detriment to itself. Surety companies don't make money from investing in companies that fail. Premiums paid to surety companies are simply meant to cover underwriting costs. Since failure costs everyone, especially the surety, they make the most by only offering contractors license bonds to businesses that are proven to come through.

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