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3 Ways Contractor Bonds Protect Your Remodeling Project

3 Ways Contractor Bonds Protect Your Remodeling Project

Surety bonds feel more like an annoyance rather than something to help your business but rather your clients alone.

However, when you look at the purpose of a surety bond, more particularly a contractor bond, you will realize it’s not one-way traffic you thought, but it can benefit you as well.

If you are a developer and have a remodeling project, you will learn that a contractor bond can be of great service.

If you are still not convinced why and how we shall look at the top 3 ways in which a contractor bond will protect your remodeling project.

Avoids Contract Disputes

Remodeling is a risky construction model, and each year, many contractors, large and small, fail before they complete their projects.

Failure to complete on a project may be caused by a variety of factors. At times, for instance, a client will dispute the percentage of completion, and at other times, a delay/natural phenomenal or another cause not contractually covered in the performance parameter might be the cause.

Now, when this happens, your remodeling company can get into disputes, and the developer or client might even withhold payment.

With a license bond, however, the primary resource of a remodeling company is litigation or liens.

Over the years, surety companies have paid millions of dollars because of contractor failure on bonded projects.

When bonded, your company’s surety has a vested interest in resolving the conflict before it reaches a point when the bond is utilized.

In most cases, when such cases arise, you will simply visit www.contractorbond.org and the surety will typically intervene to avoid the expensive delays and resolve the dispute before escalating.

However, when it does, and investigations are made in your favor, your surety will pay the owner. On the contrary, if you were not bonded, these costs would have been borne by the owner of the remodeling project.

Prevents Penalties for Operating without a Bond

Remodeling is part of the construction, which requires licensing.

Before your remodeling company can legally work on any construction project, you are first required to get a bond.

A license alongside a permit bond plays a huge role in guaranteeing that the remodeling company will fulfill their business obligation ethically and faithfully. Essentially, it means that they follow the construction rules, and still work within the confines of the law.

Failure to have a contractor license bond, in some of the states is illegal and can land your remodeling company in trouble.

In any case, if you operate illegally without a contractor license bond, you may face criminal charges as well as attract a hefty fine for your company.

Reduces Unqualified Competition

For any remodeling company to hold a contractor license bond, understand that they will have to go through a rigorous screening process.

Typically, the screening process will have to assess both the financial security and the experience/qualifications of a company. To minimize the risks, bonding agents will typically requite to see positive operational cash flow and shareholder equity growth in a remodeling company.

Generally, remodelers with questionable financial history or are poorly qualified might get it hard to secure a bond for operating.

In most cases, bond issuers will prefer working with companies with relatively low debt, excellent credit history, and moderate aging on the receivables. More importantly, they will want to work with a firm with a magnificent performance history of the past.

It, therefore, means that when you get a bonded remodeling company, you will have landed a company that is not only qualified, but it has the financial muscles to take and complete your project without any hassle.


Having a bonded company working on your remodeling project can serve you with plenty of benefits.

We always advise our readers to make a bonding license a critical consideration when choosing any contractor.