Surety Bonds in Massachusetts

Contractors may be asked to acquire bonds when working on large projects, especially projects for governments or major commercial clients. In these cases, the bonds are primarily used to provide the client with compensation if the project is never completed. They might also be used to pay workers for the labor that’s been performed.

Medical supply companies, liquor stores and other businesses may also need bonds for major sales or projects.

What Types of Contractors Surety Bonds Are Available?

In the construction industry, contractors may need any of several different surety bond types:

• Bid Bonds: Might be used to as a guarantee that a contractor will honor their bid and enter into a project.
• Performance Bonds: Might be used to guarantee that a contractor will honor their contract and complete the work as agreed.
• Payment Bonds: Might be used to guarantee that a contractor will honor their contract and pay workers all due wages.
• Maintenance Bonds: Might be used to guarantee that a contractor will provide compensation for any work defects upon the completion of a project.

When they’re needed, performance bonds and payment bonds are often purchased together.

What Parties Are Involved in Surety Bonds?

Like most types of bonds, surety bonds normally have three parties involved:

• Obligor: The party that has an obligation to guarantee, and purchases the bond.
• Obligee: The party that something is being done for.
• Surety: The party that provides financial compensation for assurance if needed.

In the event that something goes awry with a contract, the surety will usually pay the obligee a predetermined amount (up to the bond amount). The surety is likely to then pursue the obligor for the paid compensation.

How Much Do Surety Bonds Cost?

Surety bond premiums are usually determined as a percentage of the bond amount. This results in most bonds being quite affordable, although major bonds for construction projects and similarly large needs can have higher premiums.

When surety bonds are needed, the associated premiums generally can’t be avoided. They’re often built into a project bid or business plan to account for the cost.

How Can Businesses in Massachusetts Get Surety Bonds?

Although surety bonds are distinct products from normal insurance policies, bonds are commonly purchased through insurance companies. An insurance agent who specializes in these bonds can help businesses find a bond that meets their requirements. An agent who’s independent can show several requirement-meeting bonds from different companies, and thus help businesses choose the best one.

For help finding surety bonds in Massachusetts, contact the independent insurance agents at Garrity Insurance. Our agents can assist with various types of these bonds, and we have the expertise necessary to get your business set up with the perfect one for its needs.