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As an owner, a
Warranty Bond helps you cut the risk of defective construction by insuring the work performed. You
can also benefit from a Warranty Bond since your money will be reimbursed if your contractor goes
out of business or can't repair the construction work. A Warranty Bond is a contract between an
owner, a contractor, and a surety company. It guarantees that any work defects found in the original
construction will be repaired during the warranty period. If the contractor can't fix the defects, the
owner will be repaid. Your state or a surety company usually issues Warranty Bonds.
Warranty bond is a guarantee issued by a bank on behalf of the seller which secures any claims by the
buyer on the seller due to possible defects in the goods during any agreed warranty period. In building
construction business, warranty bond is guarantee for investor, that contractor will solve all warranty
issues in warranty time.
Warranty Bond- A warranty bond (also known as a maintenance bond) guarantees for the owner of the
project, that the contractor will solve all warranty issues during the specified warranty period, which is
usually 1 year from completion/acceptance of the project. The warranty period could be longer
depending on the terms of the contract. If contractor is unable to solve the warranty issue or is not in
business during the specified warranty period, the warranty bond provides the owner of the project with
a remedy through the surety to fix the warranty issues.
When requesting a warranty bond on an account that has already been previously submitted to
the surety, among the most important information that needs to be provided to the surety are the
following information:
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The Bond Request form - this will provide the surety with a basic overview of the
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bond is required; the penal sum of the warranty bond; the duration of the warranty period;
the scope of work covered with the warranty, etc.
Provide information on how the contract was awarded. Was the contract awarded as
part of a negotiation or was it awarded though a bid process? If the contract was received as
part of a bid process, the surety will inquire as to what security was used to bid the project
and want to know the bid results. The bid results is a tabulation of all bids that were entered
for that contract. If the low bid and the second low bid is different by more than a certain
percentage (most sureties usually has range from 10-20%) they will require an explanation for
the difference.
If the obligee/owner has their own warranty bond form, surety company will want to
verify that the form has acceptable language. If no required form exist, most sureties have
their own generic form.
Provide a list of companies/manufacturers or vendors that can provide the same or
comparable work as specified in the warranty as to provide assurance to the surety that if
contractor defaults, surety can easily find another entity to cover the warranty.
If the surety bond is the first bond being requested on behalf of a new contractor, the following
information should be provided in the submission in addition to the above mentioned items.
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Contractor's Questionnaire.
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Business financial statements (balance sheet, income statement, statement of cash
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flows and aging schedule for accounts receivable and accounts payable) for the company's last
3 fiscal year end.
Interim Business Financial Statements.
Personal Financial Statement for all owners of the company
Articles of incorporation (if corporation), LLC agreement (if business is a LLC) or
partnership agreement (if business is a partnership).
Bank reference letter and last 3 months most recent business and personal bank
statements.
Resume for all key personnel of the business.
Copies of all insurance (general liability, professional liability, worker's compensation,
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etc).
Current work in progress schedule.
Copy of the contractor's license and other relevant licenses.
Copy of the trust f any of the owners of the business have their assets held in that
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trust.
http://www.knowsuretybonds.com/contract_warranty_bond.html
1.
1.
Warranty Bond
Guarantees the completed works during the maintenance period, generally one year, against defective workmanship or
materials.
What is a Warranty\Maintenance Bond?
When requested this bond is usually written for 1 year. Unlike product warranties, this bond simply
guarantees the workmanship of the contractor for a given period of time.
Warranty Bond be filed by the contractor to provide assurances to the project owner that all warranty
related obligations will be met in a timely fashion within the contractual guidelines and obligations
without fail at all times. This will also serve as proof of your compliance and adherence to the state
and local laws and regulations that govern your industry. So if you are a contractor and you are in
need of a Warranty Bond you have certainly come to the right place!
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Function
A warranty bond ensures that the work done by a contractor is
not only to your satisfaction, but adheres to all state and local codes for the
work done. Warranty bonds are usually administered by the state in which a
contractor operates. Most reputable contractors will advertise their "licensed
and bonded" status.
Benefits
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Considerations
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Time Frame
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Misconceptions
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When a client chooses to have contract work on their home or property, they are putting a great deal
of trust into that contractor who will be doing that work. Because there is risk to this, the contractor
should secure a warranty bond. Warranty bonds ensure that clients are able to have peace of mind
in the work that will be done to their property.
A warranty bond serves an important purpose. This type of security bond will indicate to your clients
that you have taken extra steps to prove your trustworthiness. As a contractor, your security bonds
are stating that you have a history of trustworthiness and this is why the state granted you the bond.
Additionally, you are letting the client know that they are not defenseless should the work done on
their property be subpar, dangerous, or unethical in any manner whatsoever.
Warranty bonds are important to the client and the contractor. If you need to apply for one of the
bonds, then the professionals at Ox Bonding can help you.
CARI
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Incident Report
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Weather and rainfall report from the nearest weather station officially issued by the PAGASA (if
applicable/required)
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Survey of damages based on standard engineering practices (Plans, survey data, PERT CPM, etc.)
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Detailed computation of loss and damages in order to bring back the damaged portions to its original
condition before the loss
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Certified copies of recent and previous monthly accomplishment/progress report including its back up
computation
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Documents in support to the actual cost of repair/replacement of the affected properties such as invoices,
receipts, etc.
15.
Clear and properly annotated panoramic pictures immediately taken after the loss
The contractor all risks policy is specially designed to cover for loss or damage to
predominantly civil engineering construction projects ranging from small villa to
construction of bridges or high rise.
This is an All Risk policy covering various activities of construction (except
Flexibility of admitted and non-admitted policy forms available in all 50 U.S. states
Global risk transfer solutions can be tailored for accounts of all sizes
Coverage
Builders risk designed for installation coverage for trade and smaller contractors
Delay in start-up (DSU) coverage, including soft costs, debt service and advance
loss of profits/rents
Transit, ocean cargo and inland marine coverage also available from AIG
Wherever there is the construction of buildings or civil works, there is a risk of loss or
damage. The contract governing the works will place the responsibility for this loss or
damage with either the Contractor or Employer.
Our Contractors All Risks insurance policy can protect either party against the cost of this
loss or damage.
Cover for damage to permanent and temporary works and free issue materials,
whilst on site and whilst in transit to and from site.
Cover for owned and hired in plant and machinery.
Up to 12 months cover after completion for contractual obligations forming part of
the maintenance or defects liability period.
Cover for any party that is required to be a joint named insured under the contract
Additional cover as standard including Professional fees and Debris Removal. Please
refer to the policy wording for a full list of extensions.
Contractors' All Risks Insurance (CAR) - this provides coverage for buildings and civil engineering projects during
construction, against accidents resulting in loss, or damage/destruction of materials, work in progress, construction
plant and equipment and construction machinery. Construction of condominiums, offices, buildings, hospitals,
schools, factories, roads and bridges are just a few examples of where CAR can be applied. The policy protects you
against accidents and damage caused by fire, lightning, explosions, earthquakes, landslides, typhoons, floods, short
circuit (and other electrical causes), negligence, lack of skill, malicious acts, theft, and burglary.
http://www.bpims.com/engineering_insurance.htm