Hiring a contractor who has a surety bond to assure you of his credibility is very important. Once you find a contractor who can provide you with this bond, then it might be the indication that he’s the right one for the job. However, even though a surety bond makes everything less risky for you, it won’t be able to prevent problems from arising. You should be ready for any kinds of issues by understanding how you can process your surety bond claims.
The first requirement of insurance companies before giving you your claims is a declaration of default of your contractor. There are a lot of things that can cause this default, and some of them are not complying with the terms of the contract, voluntary default of the contractor that you hired, or even financial default. If any of these things happen, then it’s an indication that you can file your claims for the surety bond. Understanding the process prepares you for what you might encounter when going to the insurance company.
After declaring the default of your contractor, the obligation of the surety or the insurance company starts to mature, and that means they finally need to get involved in the situation by fulfilling the obligation. But the first thing that the surety will do is to investigate the case considering the perspective of both parties.
The surety will review the contract that has been signed by the principal and the obligee to make sure that there is a default. The insurance company will also be in charge of assessing the status of the contract. The surety is going to evaluate the situation and the contract carefully if there is a breach of contract or if they are obligated at this point.
As a claimant, you have to be aware of the requirements needed before you get the claim. There is a specific time required by states before you can send notices or claims payments of the surety bond. These requirements will vary depending on the state that you are in. Meanwhile, subcontractors who haven’t received their payments within 90 days has the power to file for the claim of their payment bonds under the Miller Act.
After The The Declaration Of Contractor Default
Once it has been decided by the surety that there is a need to declare a default for the contractor, then there are various options that the surety can take to fulfill its obligations in the surety bond. Here are some of them.
• Tender Option – Hiring a new contractor which the surety will pay higher than the amount of the bond. The payment will either be given directly to you or to the new contractor who will finish the job for you.
• Takeover Option – The surety will hire a completion contractor for the project.
Now that you understand the process of surety bond claims, you are ready to hire a contractor who can provide you with this bond but if not go to gadelaw.com for more info. You are never fully protected if you don’t understand the whole process. More importantly, hiring someone you are comfortable working with and is recommended by a lot of people is important to avoid wasting money and time.