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Maintenance Bond

Warranty and Maintenance Bonds

There are dozens of different types of surety bonds, of which maintenance bonds are just one. If your business requires one of these surety bonds, it's essential that you know the details. Obtaining a bond doesn't have to be difficult or confusing - but there can be significant consequences if you don't obtain the bond you need. Use this resource to explore everything you need to know about a maintenance surety bond.

What is a Maintenance Bond?

A Maintenance Bond (also known as a warranty bond) is a type of contract performance bond. They are provided as a guarantee that the work completed for a contract will stay in a satisfactory condition for a set period of time after the job is complete. In the event that the work does not meet this standard, an entity may file a claim against the bond seeking financial compensation for any damages resulting from insufficient maintenance, which is guaranteed to be paid as long as the claim proves valid. Essentially, maintenance bonds make the bonded party financially accountable for any work that does not meet previously agreed upon standards.

How does a Maintenance Bond work?

The bond ensures that the contractor will maintain the project to the required standards; if they don't, the obligee (the person who requires the bond) will be able to receive financial compensation from the surety provider to get the issues fixed themselves. Unlike many other types of surety bonds, warranty and maintenance bonds are not issued until the job is completed.

They're an important part of many construction contracts because they create a system of accountability, which then leads to higher trust. A project owner can feel confident that maintenance will meet the necessary standards when there's a surety bond in place. The maintenance provider also benefits from this process by using the bond to gain the confidence of prospective business partners.

Who should get a Maintenance Bond?

These types of bonds are often required by government entities, but they can factor into any kind of contractual agreement that involves ongoing maintenance or commitments to meeting ongoing performance standards. It's up to the obligee - the person allowed to file claims against the bond - to decide if and when they require a bond. When one is necessary, the other party will likely be well aware of the requirement, in which case they should seek out a bond to avoid holding up the contract unnecessarily.

Finding a quality surety company to work with can be difficult, which is why Viking Bond Service exists. As a nationwide surety brokerage with extensive resources, we can help applicants in any state get a quote for a maintenance bond in a matter of hours. Get the bond requirement out of the way so that you can focus on the business at hand.

Who are the parties involved in a Maintenance Bond?

Your bond will involve three parties. These are:

  • The principal is the person who obtains the bond (you). The principal takes on the cost of the surety bond, as well as the responsibility to pay for any claims filed by the obligee.
  • The obligee is usually a government or business entity that requires the bond. The obligee also has the right to submit a claim for damages if they believe previously-agreed upon maintenance standards have not been met by the principal.
  • The surety is the underwriter who issues the bond. The surety pays the obligee to settle all valid claims, but afterwards the principal must reimburse the surety and pay interest and fees.

Maintenance Bond vs Performance Bond

Even though these two types of bonds work in basically the same way, performance bonds ensure that contractors complete projects according to certain standards and timelines. Compare that to the maintenance bond definition, which ensures contractors address any problems related to construction quality, materials, or design, that may arise after the initial contracted project is completed. These bonds address two phases of the same project. Consequently, it's not unusual for someone to need both of these bonds. Make sure that process runs seamlessly by working with the same surety provider for both bonds.

How much does a Maintenance Bond cost?

Warranty bond costs will be influenced by many factors. These factors include the amount of the required bond, the state the bond is issued in, the credit score of the principal applicant, and the type of bond required. Typically, surety bonds like this one cost a small percentage of the bond value. As long as you manage to avoid having any claims filed against the bond, the premiums are the only cost associated with the bond. To find out how much a maintenance surety bond would cost you, request a free quote from Viking Bond Service. We will run the numbers, identify the most economical rates/terms available, and get back to you within 48 hours.

Can you get a Maintenance Bond with bad credit?

You can as long as you work with the right surety brokerage. One like Viking Bond Service with abundant resources and connections throughout the industry does everything possible to get all applicants approved for a quality bond at a fair price - even with bad credit. If you think you might have trouble getting bonded elsewhere because of your credit score or financial history - and especially if you've been denied for a surety bond elsewhere - take advantage of a special program we designed for applicants like you.

How long does a Maintenance Bond remain valid?

The length of the warranty is determined by the contract. The contract specified warranty period may be influenced by governing laws and ordinances which can set minimum warranty periods. The maintenance bond term will cover the warranty period specified in the contract. Once that period is done, the bond expires.

How are claims handled for Maintenance Bonds?

The surety commits to pay for all valid claims, but first they will conduct an investigation to prove that warranty/maintenance obligations were not met. That's an easy determination in some cases, but in others it requires time, study, and additional resources such as investigators or lawyers. Sureties want to prove as definitively as possible that a claim has merit before they agree to pay it. When the surety does settle a claim, the principal (the contractor who obtained the bond) must pay the surety back the full amount with interest and fees added.

How to apply for a Maintenance Bond?

To obtain warranty bonds you must submit a completed application and provide the required supporting documentation. Required documentation often includes a credit report, business financial statements, and a business resume. You will also need a document from the obligee detailing the maintenance work required and the standards expected, if not already contained in the contract. You'll often be provided with a document checklist as part of the application process. Take advantage of an easy application process and helpful support team by working with Viking Bond Service.

Viking Bond Service - Your Bond Partner

We're one of the leading providers of warranty & maintenance bonds in the United States, helping you obtain the bond you need for your business. Our friendly team of experienced staff can help make the application process for your warranty and maintenance bond quick and easy. Get your application process started or get more info from our experts by contacting us through the form on this page or at 888-278-7389.

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