What is a Maintenance Bond?
A maintenance bond (warranty bond) is a contract surety bond that protects the owner of a construction project for a certain period after its completion against defects and faults in the structure. On certain structures, such as those for public or commercial purposes, maintenance bonds are required by local governments, while on private and residential projects they are mostly optional.
Maintenance bonds guarantee that once a contractor has completed work on a project, if any faults in workmanship, materials or design should become obvious, the contractor will either fix these or the owners will be compensated for the losses. Maintenance bonds also work as a form of security that the project has been constructed in accordance with local regulations, building codes and standards. Maintenance terms usually vary between 12 and 24 months.
Like all surety bonds, a maintenance bond is a three-party agreement. The obligee is the party requesting the bond (the project owner), the principal is the side being bonded (the contractor) and the surety is the company underwriting the bond.
In the case of a defect or failure in the structure or breach of regulations, within the span of the maintenance term, the obligee is eligible to raise a claim against the maintenance bond. The surety then has to proceed with remedying the problem or compensating the obligee for its losses.
Maintenance Bond Cost
Your maintenance bond premium is a fraction of the whole contract amount that you need to get covered for.
The rate of your premium depends on:
- the total bond Contract amount requested
- your personal credit score
- other bonds associated with the project, and
- the surety company you are working with
Your personal credit score is among the most important factors that determine the rate of your premium. If you have a good credit standing, your premium will be between 1%-4% of the total maintenance bond amount. In other words, for a $50,000 maintenance bond, you will have to pay between $500 and $2000.
Obtaining a maintenance bond, along with your performance bond means that the overall cost of your bonds may be reduced, as any potential risks associated with a project will be spread more evenly among the bonds covering them.
Another important factor is the surety company you choose to work with. Your surety company must be reliable, professional and with good standing. Bryant Surety Bonds works only with A rated and T-listed surety bond companies, giving you access to the lowest and most exclusive rates on maintenance bonds in every state.
Get Your Maintenance Bond Fast
Need a maintenance bond? To get started, all you need to do is follow the steps on our online application page.
If you have more questions about your maintenance bond, just call us at 866.450.3412. Our surety bonds experts can provide you with all the additional information and details you need.