Posted by OldRepublicSurety
Surety underwriters ask a lot of questions. They do so to fully understand your business to better support your project opportunities. Part of the process is determining you qualify for the size and scope of the projects for which you require bonds. If your organization cannot carry out the construction contract, your surety is obligated to carry out the project according to the construction contract terms. This two-part article will familiarize you with bond terms, contract issues that arise in typical construction projects, and explain why surety underwriters ask so many questions in the surety bond application process.
Surety construction bonds are generally performance bonds. According to the International Risk Management Institute, a performance bond “guarantees that the contractor will perform the work in accordance
with the construction contract and related documents, thus protecting the owner from financial loss up to the bond limit (called the penal sum) in the event the contractor fails to fulfill its contractual obligations.”