Construction is booming across Alberta, and particularly in Calgary. Thirty years ago, Calgary was a mid-sized city by metropolitan standards, with a population between 600,000 and 700,000. Today, the city has burgeoned to well over 1 million residents, and with that kind of growth, it’s easy to see why Calgary has become such a hotbed for the province’s construction industry. From subdivisions and condominium developments to industrial and commercial development, new projects seem to be sprouting up overnight all across the city.
For all those in the construction industry, we at Lane’s Insurancewould like to remind you of the importance of construction surety bonds in Calgary.
A surety bond is a financial instrument that serves as a form of insurance on a performance contract, and they protect the bond holder (known as the “obligee”) in the event that the entity under contract (the “principal”) fails to honour their contractual obligations. For example, if a property developer hires a construction company to build a strip mall, a surety bond would cover the developer’s resultant financial losses if the construction company failed to complete construction.
There are three main types of construction surety bonds:
- Labour & material bonds
- Performance bonds
- Bid bonds
Each of these bonds covers specific circumstances. Understanding the difference between the various types of construction surety bonds means ensuring you’re getting the right coverage.
Calgary Surety Bonds Type #1: Labour & Material
This type of surety bond protects subcontractors and suppliers in the event that the principal fails to pay them, in part or in full, for their labour and materials costs. There are other forms of recourse available for subcontractors and suppliers who find themselves in this position, but surety bonds are one of the most effective protection mechanisms available.
Labour and material surety bonds must be precisely worded to ensure that suppliers and subcontractors are able to make legitimate claims if the principal fails to honour existing agreements. If you are a subcontractor or supplier and you’re considering this type of bond, be sure that you fully understand its provisions before finalizing the agreement. No two labour and material surety bonds are exactly alike, so be certain that you’re getting the essential coverage you need within the context of your specific business arrangement.
Calgary Surety Bonds Type #2: Performance
Performance surety bonds can be very complex. In essence, they protect the obligee from financial losses in the event that the principal fails to perform “as expected” under the terms of the agreed-upon contract between the two parties. A wide range of events can trigger a claim under a performance surety bond, including:
- The insolvency of the principal
- Refusal to address any structural deficiencies or building code violations
- Failure to complete the project on time
- Refusal to complete the project
Some, all, or none of these potential scenarios may apply to your case. If you want the protection and peace of mind offered by a performance surety bond, discuss your particular needs with a qualified insurance representative.
Calgary Surety Bonds Type #3: Bid
Bid bonds come into play during the early phase of a construction project, when contractors are bidding on the job. Many project developers require all contractors submitting bids to have bid bonds, which essentially ensure that the bidding contractor has the resources and ability to perform the job. In effect, bid bonds prevent companies that lack the financial resources, personnel, and technical aplomb to complete the project in question from submitting a bid on it.
Again, bid bonds are subject to a long list of technicalities and loopholes, and you may need advice and assistance as you navigate your options. If you are a construction contractor, you should be sure you’re properly protected before submitting a bid on any project.
Your Complete Resource for Construction Surety Bonds in Calgary
At Lane’s Insurance, we offer highly competitive rates on all three types of construction surety bonds in Calgary, and we’ll work hard to make sure you get the right coverage for the right price. If you have any questions about this essential coverage, or if you have any other personal or commercial insurance needs to be met, please contact us at Lane’s Insurance and we’ll be happy to discuss your specific needs in detail. Our goal is to provide each and every one of our clients with personalized service and the kind of affordable, enhanced protection that you deserve.
