Performance Bond Texas
Building and other forms of construction often represent massive projects involving a great deal of money, many expensive supplies, and public safety. A specific surety bond known as a performance bond ensures that contractors follow all appropriate laws and regulations and complete the contract without default. If you have won a contract that requires you to obtain a Texas performance bond, you will not be legally permitted to begin without the bond.
What is a Performance Bond in Texas?
A performance bond in Texas is a type of surety bond that requires a contractor to complete a specified contract according to the relevant laws and regulations. The bond's power results from a financial incentive paired with an enforcement mechanism. If the contractor defaults on the contract, the project owner can claim on the bond to help recover from the damages. A Texas performance bond limits a project owner's risk exposure.
How Does a Texas Performance Bond Work?
Like any surety bond in Texas, a Texas performance bond is a legal agreement between three essential parties:
- The Principal is the bonded contractor.
- The Obligee is the government agency or private project owner who requires the surety bond.
- The Surety is the insurance company that underwrites the bond.
If someone believes they have been damaged due to a contractor's failure to complete the contract, they are entitled to file a claim against the bond. The surety thoroughly investigates all claims against the bond. If the surety determines the claim is valid, they will pay the damages up to the bond's total value. The surety will dismiss any claims that have no merit.
The principal must repay the surety for any claims paid against the performance bond in Texas.
Who Needs a Texas Performance Bond?
There are three circumstances in which a contractor is required to obtain a Texas performance bond:
- Federal projects valued at $100,000 or more.
- State projects valued at $100,000 or more.
- Private projects where the project owner requires one.
In each of these circumstances, you may also be required to get a Texas payment bond. The surety experts of Viking Bond Service stand ready to guide you through the bonding process for all your surety needs.
How Much Does a Texas Performance Bond Cost?
A Texas performance bond's cost bond is directly tied to the bond's value and the principal's credit rating. The bond value is dictated by the obligee and corresponds with the size of the contract. The principal's credit score is the among the best gauges of the risk the surety assumes when issuing the bond.
As with most surety bonds' costs, the premium on a Texas performance bond is a tiny fraction of the bond value. If the bond is for $100,000, the cost ranges between 1-5%, or $1,000 - $5,000, depending upon your credit rating. The better your credit score, the lower the premium you pay.
How Can I Get a Performance Bond in Texas?
It's always easy to obtain a surety bond with Viking Bond Service. Speak with one of our Texas Performance bond expert who will guide you through the application process and send you a competitive quote for your performance bond in Texas ASAP. We welcome your questions! Contact us online or call us at 1-888-2-SURETY (1-888-278-7389). We're here to help.
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