Poerio Inc. | Industry Basics | Risk Management
Bonding and insurance are two of the most important — and least understood — aspects of construction contracts. If you’re a property owner about to hire a general contractor, having a basic understanding of these protections can save you a lot of headaches. Here’s what you need to know.
Construction Insurance: The Basics
Every reputable contractor carries several types of insurance. General liability insurance covers property damage and bodily injury claims that arise from the construction work. Workers’ compensation covers injuries to the contractor’s employees on the job. Commercial auto insurance covers vehicles used in the work.
As a property owner, you should always verify that your contractor and their subcontractors carry adequate insurance. Ask for certificates of insurance before work begins, and make sure you’re listed as an additional insured on the general liability policy. This is standard practice, and any professional contractor will provide it without hesitation.
What Are Construction Bonds?
Bonds are a different kind of protection. A surety bond is essentially a guarantee from a bonding company (the surety) that the contractor will fulfill their contractual obligations. There are three main types you should know about.
A bid bond guarantees that if the contractor is awarded the project, they’ll enter into the contract at their bid price. A performance bond guarantees that the contractor will complete the project according to the contract terms. If they don’t, the surety steps in to arrange completion. A payment bond guarantees that the contractor will pay their subcontractors and suppliers, protecting you from mechanic’s liens on your property.
Do You Need Bonds on Your Project?
Public projects almost always require performance and payment bonds. For private projects, it depends on the project size, complexity, and your risk tolerance. On larger projects, bonds provide significant peace of mind. If something goes wrong with your contractor — financial trouble, failure to perform — the surety company is on the hook.
Bonds do add cost, typically 1–3% of the contract value. Whether that cost is justified depends on the specifics of your project and your level of confidence in your contractor.
What Poerio Brings to the Table
Poerio is fully bonded and insured. Our bonding capacity reflects our financial strength, our track record, and the confidence that surety companies have in our ability to deliver. We’re happy to provide bonds on any project where they’re required or desired. If you have questions about whether bonding makes sense for your project, we can help you think through it.
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