Bonds for business
What are bonds ?
A bond is a kind of financial guarantee meant to protect the beneficiary (client) in the event of default by the principal debtor (contractor). This contract provides a financial guarantee that the debtor will fulfill its contractual obligations to its clients.
You can get this bond from a financial institution or an insurance company, which acts as “surety.”
That’s where BC ASSUR comes in. We provide the guidance and support you need to get your bond as quickly as possible.
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Construction bonds:
Bonds are most often used in the construction sector. The surety guarantees to the owner that the contractor will fulfill the terms and conditions of the agreed contract. If the contractor fails to meet these obligations, the surety will pay a specified amount.
In other words, bonds compensate the client (beneficiary) in the event of losses due to the contractor’s failure to perform the work stipulated in the agreement or delivery of incomplete work, project delays, compliance errors and any other damage arising from the construction project and which will be identified within one year after the work is completed.
Types of bonds :
Bid bond:
Bid bonds guarantee that the debtor will enter into a contract with the beneficiary if selected, and provides assurance to the owner that the project will be successfully completed as per the main obligations and client requirements. After the client issues a call for tenders, along with a cost estimate for the work, they must receive the contractor’s tender and a letter of indemnity, both of which must be approved, signed and sealed by the surety.
Performance bond:
Ensures that the contract signed by the three parties is fulfilled according to the agreed-upon conditions (quality of materials, project deadlines and so on).
Labour and material payment bond:
A payment bond complements the performance bond and the two should be executed together for the benefit of the owner, to ensure the contract is fully performed. It guarantees that the subcontractors and suppliers who have a direct contract with the bonded contractor (the debtor) are paid for the materials and labour needed to complete the project.
Maintenance bond:
This type of bond guarantees to the owner that any defects or poor workmanship on a project will be corrected for a specified period of time.
Licence bond:
The contractor must send this mandatory bond to the Régie du Bâtiment du Québec (RBQ) to provide proof of guarantee that customers will be compensated if they suffer losses or damage.
La Régie du Bâtiment du Québec (RBQ)
The RBQ is a government agency that regulates the construction industry. Any contractor that wants to perform construction or renovation work must get a licence from the RBQ
Bonds amounts:
The amount of the construction bid bond is usually a fixed amount or 10% of the amount of the contract between the client (beneficiary) and the contractor (debtor).
For performance bonds, this amount can be as much as 50% of the contract amount.
The amount required for licence bonds is $20,000 for specialized contractors or subcontractors and $40,000 for general contractors.
Contact us today to find out more and get started on your bond! Our professionals are here to guide you through the entire process.
The many benefits of bonds:
- Helps you get all the necessary information and the debtor’s financial situation to ensure the project runs smoothly before it begins
- Provides greater flexibility and peace of mind for large projects
- Represents a good guarantee that the contract will be performed
- Helps ensure better selection of contractors
- Strengthens the contractor’s reputation in the marketplace
- Replaces a line of credit or certified cheque
- Promotes healthy competition
- And finally, the surety’s solvency protects the owner
If you’d like to know more, our brokers will be happy to thoroughly explain everything.
“BC ASSUR”, your bond expert
At BC ASSUR, our commercial insurance brokers will help you with all your bond needs. We work with many insurers who have extensive surety experience. We can get the necessary approvals for you, verify that the documents meet your contractual obligations, and even deliver your most urgent completed bids in person.
BC ASSUR is the partner you need to make sure your projects requiring bonds are successful. We know how important bonds are for client trust and market recognition. Our brokers are here for you!
BC ASSUR, your professional partner.
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