What are the common construction bonds and insurances?

Good designs, the use of high-quality materials, and excellent construction practices are essential for a project's success.

- By HENRY L. YAP, UAP, FPIEP, EAROPH

However, despite these factors, mistakes and disagreements can occur during construction, potentially leading to damages, disputes, and substantial financial losses.

Project construction is a complex and costly endeavor that demands careful planning and protection. To safeguard owners, contractors, suppliers, and other stakeholders, you should ensure that the necessary bonds and insurances are in place. Depending on the project's complexity, additional bonds and insurance policies may be required.

CONSTRUCTION-RELATED BONDS Construction bonds act as a safety net for owners, protecting them from risks like poor performance, company default, non-payment, and warranty issues. Bonds offer unique features, safeguarding project owners and contractors from financial problems during and after construction.

Contractors are often required to post bonds for significant projects, to make sure their compliance with specific obligations and produce high-quality work. If issues arise, the insurance company will reimburse the owner for extra costs due to the contractor's negligence.

Bond costs can be significant for contractors, and would depend on their financial situation and past performance.

Common construction-related bonds include: