A performance bond is a bond signed between three parties – Oblige (owner), the principal (contractor) and surety (bonding company). It lists the clauses that the principal needs to perform in order to fulfill obliges requirements. There is a financial clause in performance bonds that is typically between 50%-100% of the contract amount.
Most of the larger project owners in Canada look for only those bidders who already have performance bonds from a surety company. Let’s go over some basic rules with respect to these companies.
Are they licensed in Canada?
• Never purchase bonds from a company that is unlicensed.
• Most obliges will not accept your bond if the surety company is not licensed to operate in Canada.
Are they certified?
Even if the insurer is licensed, you still need to look at his credentials. Ensure that the insurer is certified by either one or both of the following:
• A.M. Best Company – They have issued ratings to more than 3500 companies providing performance bond canada. If the insurer you are looking for has an A-Rating on this website, you can safely proceed.
• The government approved surety companies – The Canadian government undertakes an exhaustive review of various sureties before placing them on its list as “T-Listed.” When you have huge financial undertakings, going for a surety from this list will ensure that you are covered.
Before you move on
• While it may seem that signing up with a huge bonding corporation will be a safe bet, it usually is not. Because of a large number of clients they have on board, paying individual attention to their customers becomes very difficult.
• Don’t rush through the process of obtaining the bond. Time saved now will because you hassle later.
The responsibility of finding a good bonding company and agent lies with you. Do your research online and find the best sureties for performance bonds in Ontario.