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An insurance bond is an agreement among three parties — the principal, the surety company, and the beneficiary. It protects the beneficiary named on the bond. When there is a valid claim on a bond, the principal is responsible for repaying the surety company for their losses. Qualifying for a bond can be much like qualifying for a loan; employment history, credit rating, personal assets, and experience are all factors the Surety Company examines when determining whether or not to issue a bond. An extensive qualifying process is more common with high-risk performance bonds than in a low-risk category with little or no past record of claims.

A roofing company with a proven track record in the industry that can demonstrate financial strength and is known for honoring it's commitments, keeps bonding requirements to a minimum.

Bid Bonds - is most widely used in the public bid sector of the roofing industry. This is a security blanket used by Local, State and Federal Agencies and Institutions to protect themselves somewhat from the unqualified bids and bidding firms responding to the public bid market.

Payment Bonds - are most commonly requested by Public Works clients and by Developers and General Contractors seeking protection against their vendors and subcontractors who may not pay their labor and materials bills on time. This assures them that they will not have liens placed on properties by the employees, vendors, and subcontractors of the roofing contracting firms. Rarely do building owners request this type of bond in their request for proposal or bid specifications.

Performance Bonds - are the most commonly requested form of bonding in the roofing industry. The majority of requests for this type of bonding comes from the public works, developers, general contractors, and skeptical customers.

Warranty Bonds - This type of bond was popular in the roofing industry in the 1950's, 60's and early 70's. They gained popularity when various roofing system types were experiencing premature failure and causing alarm. They also were popular when a standard Contractor and/or System Manufacturer Warranty was 2 to 5 years in duration. This type of warranty bond typically had a "penal sum limit" attached to their term. It was limited by a number of years and also by an aggregate coverage limit. The penal sum coverage limit was typically for only 5% to 10% of the initial cost of the roofs' construction. Today the current Manufacturers Warranties that are offered are typically for 10 years (on total labor and materials, with the contractor agreeing to a 2-year labor warranty back to his supplier). These warranties typically cover at a minimum the initial cost of construction to a maximum of the future total replacement cost during the term of the warranty. There has been little, if any demand for warranty bonds since this development.