Bid & Performance Bonds
Understanding the differences between different bonds and knowing which kinds of bond your contracting business should use and when can be confusing. At DJM Insurance, we’re all about making insurance easy, which means we take the time to understand your business inside and out before making Bid and Performance Bond recommendations. No matter how big or small your policy, you’ll enjoy benefits when working with us that include:
- Affordable, Personalized Quotes
- Focus on the Customer Experience
- Policy Options From Over 50 Providers
- Insurance Specialists with Over 20 Years of Experience
Everything you need to know
Have questions about Bid & Performance Bonds?
You aren’t alone if you have questions about Bid and Performance Bonds. We get them all the time! Here are a few answers to common questions we often receive, but don’t hesitate to give us a call if you have a question about Bid and Performance Bonds that aren’t answered below.
Bid bonds are used to help select which contractor gets a particular project. Clients receiving bids from multiple contractors are more likely to choose a contractor with a bid bond because it ensures they abide by the terms of the bid they provide. If the work is in progress, but the terms of the bid are not being met, the contract can be broken and the client can be compensated for the cost difference between the initial contractor's bid and the next-lowest bid from another contractor.
Costs for Bid Bonds vary depending on the financial history of the contractor, the size of the project, and more. Usually, the bond premium is a percentage of the total cost of the project. Calculating the bond and how much it will cost a contractor involves penal sums that usually range between five and ten percent, in addition to the cost of the project, so it’s important to talk to a DJM insurance specialist to determine exactly how much your next Bid Bond will cost.
Bid and Performance Bonds are very different. A Bid Bond ensures a contractor will abide by the terms of the bid before the project is awarded, while performance bonds come into effect after a contractor has won the bid, ensuring the actual work is completed. Both protect the clients and contractors from unanticipated costs when a project is left incomplete.
Bonds can be refunded when they are never actually submitted to the client. In some extenuating circumstances, bonds can be refunded during the project. However, most of the time, contractors will not receive a refund. It's important to discuss the terms of your bond with your DJM Insurance broker.
A Performance Bond is designed to protect the client from an incomplete project. If it is not completed per the terms of the agreement, the client can receive compensation for losses and damages. Much of the time, this money is used to pay another contractor to finish the project.
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