What is a Maintenance Bond?
Maintenance bonds are very common in the commercial construction industry and function as a safety net for project owners and developers that the contractors they hire will agree to fix defects that arise after a project is completed. They are only active for a specified period of time.
Maintenance Bonds are legal agreements between 3 parties:
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Maintenance Bonds are legal agreements between 3 parties:
- Obligee (Project Owner or Real Estate Developer)
- Principal (Contractor hired to do work)
- Surety (The Company Issuing the bond)
Click below to go to our innovative bond portal. You can quote, bind, and issue a bond in less than 5 minutes! Note that some types of bonds and higher bond amounts aren't eligible for online instant issue and will require additional underwriting.
How Maintenance Bonds Work:
When a contractor (Principal) wins a bid on a new job (which requires a bid bond), the contractor then has to acquire a performance bond (from a Surety) to reassure the project owner (Obligee) that you will follow through with your bid and complete the project as promised. Once the project is complete, the contractor will be required to have a maintenance bond which guarantees that the contractor will fix any defects that happen for a period of time after their work is complete. If the contractor fails to provide the on-going maintenance as agreed upon, a claim can be filed on the bond and the surety will compensate the obligee for the cost to hire a new contractor to fix the defects.
What does a Maintenance Bond Cost?
Maintenance Bonds typically add additional costs to your performance bond. The first year is free and every year after that will be an additional cost of 0.1% to 0.3% of the contract amount. For example, a maintenance bond for a $100,000 contract would be $100 to $300.
Factors that play a role in the cost of a performance bond include credit history, work experience, personal and corporate financials, as well as the type of work to be completed.
Maintenance bonds are typically purchased simultaneously with Performance Bonds and Payment Bonds.
Click below to go to our innovative bond portal. You can quote, bind, and issue a bond in less than 5 minutes! Note that some types of bonds and higher bond amounts aren't eligible for online instant issue and will require additional underwriting.
Factors that play a role in the cost of a performance bond include credit history, work experience, personal and corporate financials, as well as the type of work to be completed.
Maintenance bonds are typically purchased simultaneously with Performance Bonds and Payment Bonds.
Click below to go to our innovative bond portal. You can quote, bind, and issue a bond in less than 5 minutes! Note that some types of bonds and higher bond amounts aren't eligible for online instant issue and will require additional underwriting.