Know Surety Bonds.com
Warranty Bond- A warranty bond (also known as a maintenance bond) guarantees for the owner of the project, that the contractor will solve all warranty issues during the specified warranty period, which is usually 1 year from completion/acceptance of the project. The warranty period could be longer depending on the terms of the contract. If contractor is unable to solve the warranty issue or is not in business during the specified warranty period, the warranty bond provides the owner of the project with a remedy through the surety to fix the warranty issues.
- When requesting a warranty bond on an account that has already been previously submitted to the surety, among the most important information that needs to be provided to the surety are the following information:
- The Bond Request form - this will provide the surety with a basic overview of the current bond being requested.
- A copy of the complete contract. The contract will verify among other things: that a bond is required; the penal sum of the warranty bond; the duration of the warranty period; the scope of work covered with the warranty, etc.
- Provide information on how the contract was awarded. Was the contract awarded as part of a negotiation or was it awarded though a bid process? If the contract was received as part of a bid process, the surety will inquire as to what security was used to bid the project and want to know the bid results. The bid results is a tabulation of all bids that were entered for that contract. If the low bid and the second low bid is different by more than a certain percentage (most sureties usually has range from 10-20%) they will require an explanation for the difference.
- If the obligee/owner has their own warranty bond form, surety company will want to verify that the form has acceptable language. If no required form exist, most sureties have their own generic form.
- Provide a list of companies/manufacturers or vendors that can provide the same or comparable work as specified in the warranty as to provide assurance to the surety that if contractor defaults, surety can easily find another entity to cover the warranty.
- If the surety bond is the first bond being requested on behalf of a new contractor, the following information should be provided in the submission in addition to the above mentioned items.
- Contractor's Questionnaire.
- Business financial statements (balance sheet, income statement, statement of cash flows and aging schedule for accounts receivable and accounts payable) for the company's last 3 fiscal year end.
- Interim Business Financial Statements.
- Personal Financial Statement for all owners of the company
- Articles of incorporation (if corporation), LLC agreement (if business is a LLC) or partnership agreement (if business is a partnership).
- Bank reference letter and last 3 months most recent business and personal bank statements.
- Resume for all key personnel of the business.
- Copies of all insurance (general liability, professional liability, worker's compensation, etc).
- Current work in progress schedule.
- Copy of the contractor's license and other relevant licenses.
- Copy of the trust f any of the owners of the business have their assets held in that trust.