There is a difference between the common insurance policy and a surety bond and many people finds it difficult to differentiate between the two. A a surety bond is different from the insurance cover as it is not typical to an insurance policy, but the surety company is part of the insurance company. Therefore you are not supposed to mistakenly say that a surety bond is the same as an insurance cover.
Surety bonds offer two types of help, and one is a private construction where it makes sure that there is a smooth financing of all activities from the start to completion of the project. When we come to the public sector construction projects, a surety bond offers different services, and that is that it helps the contractor to qualify for the first place of bidding the contract, and also it makes sure that the subcontractors are paid in full, and also it makes sure that the financing of the project is smooth until the end.
When we look at the person who is contracting a contractor who has a surety bond we find that he or she benefits in different ways and one of it is that he or she is assured that the project will be through as per the agreed time in the project contract. Another merit of entering into a contract with a contractor who has a surety bond is that you are promised that all the supplies of your project will be financed regardless of whether the contractor is experiencing financial struggles or not.
Another benefit on the side of the obligee is that you are assured that any loss that may occur during the construction will be fully compensated by the bonding company in cases where the contractor is unable to pay for the losses.
Another merit to the obligee is that you are always sure that the person who you entrusted your project with has the full financial capability to take care of any risks that met occur. A person who wants to contract a project is also assured that during bidding for his or her project that even the lowest bidder will be able to complete your project within the quoted price.
On the side of the contractor, he or she also benefits from the construction surety bond and one of the merits is that he or she can bid for more tenders and this earns you as the contractor more revenue as a result of the leveraging. The contractor also gets more professional advice from the surety bond company accountants, lawyers and engineers. Lastly the contractor also benefits in the he or she is protected from any type of dispute that may occur between the clients and the contractor.