In the construction industry, the stakes are high. Poorly laid or uncompleted construction could cost you hundreds of thousands of dollars and cost you clients, who also take a financial hit. Clients want assurance that you can complete the job, and can take recourse if you don’t.
Since construction jobs cost top dollar, every state maintains a set of licensing regulations concerning them. These regulations include policies about proving that you’re bonded via some sort of contractor insurance for the jobs you commit to completing. What is contractor’s insurance and how can it benefit your business? Plus, once you have been bonded, how can you adjust the amount to support the growth of your business?
How Contractor Insurance Works
Contractor insurance bonds you for a set amount of dollars and guarantees that you will finish the job at the funds allocated by the project’s manager and investors. It also determines how many jobs you can take on at once depending on how much each job is worth.
For example, let’s say you’re bonded for $500,000 and you take on a job worth $250,000. That means you can take on other jobs, but the total of those other jobs can’t exceed $250,000.00 in total value. This gives your clients the confidence that you are taking on what you can complete without financially overextending your company.
The Benefits of Being Bonded
Making sure you are bonded benefits first and foremost your client. It protects them in the event you leave them burdened with the cost of unused or busted materials and equipment. Being bonded also guarantees that you have the financial ability to complete the project, by paying sub-contractors and getting materials to the job site in a timely fashion.
But being bonded also benefits you. Having that bond certification and number lends you a higher level of credibility. Therefore, clients will be far more likely to hire you than a contractor who isn’t bonded.
Can Your Bond Be Adjusted?
Yes! The main instance where the amounts of your bond can be adjusted is when you become financially successful as a contractor. Your bonding company wants to determine how much of a risk there is that your company won’t complete the work. The greater your financial success, the less likely it will be that you’re going to be seen as a high risk to the bonding company.
Multiple completed jobs, high cash flow, lots of working capital–these things prove you can run a contractor business. What’s more, they show that you can handle taking on multiple projects. When you prove that, the amount of your bond should go up to allow you to take on more work.
How to Prove You’re Financially Successful As a Contractor
There are a few different ways to prove you are capable of handling a larger bond amount. Doing these will make it easier to have your bond amount increased to accept larger projects, with bigger clients.
Start With Smaller Jobs
Since you’re going to start off with a smaller bond, it makes sense that you’d start off with smaller jobs. The more jobs that you do, the more experience that you build up. A record of completed jobs also demonstrates that you can manage projects, making it less likely that the bonding company will be left having to pay out to your unhappy clients.
In the world of construction, small contracts are considered to be anything below $350,000. As you complete these projects, you can build toward larger ones, with a significantly higher budget and potential payout.
Build Your Relationship With The Company Bonding You
Taking on smaller jobs isn’t just about building your experience–it’s about building the relationship you have with the company that’s bonding you.
When you take on and complete a multitude of jobs, it shows off not only your experience, but your ability to handle multiple projects. The company will grow to trust your capabilities. This will make it more likely that they will increase your bond amount.
Still Unsure? Reach Out To Us!
The world of construction contractor insurance and bonding is messy and confusing. But that’s why Top Contractors Insurances Services is here. We are a service contractors’ insurance agency specializing in contractor insurance.
If you have questions or need a consultation, please don’t hesitate to reach out to us. We’ll be happy to help you reduce your insurance costs!