the picture before a default occurs to finance the contractor or to arrange a guaranteed loan.
For small residential construction projects (usually under $500,000), it is highly unusual for a contractor to be able to obtain a performance bond. Performance bonds would be more common with commercial construction projects. However, many states require that contractors obtain a license bond.
License bonds ensure that the contractor will operate his or her business according to state laws and regulations. They act as an extra vote of confidence for the contractor and protect the consumer from wrongdoing on the contractor’s part. Claims on a license bond can be made if the contractor does not adhere to state rules and regulations or in the case of financial misconduct.
There are two types of license bond
limits. A single bond capacity sets a
dollar limit on each individual job
the contractor receives. An aggre-
gate bond capacity sets the total limit
for the jobs a contractor can perform
at once, which could potentially be
spread over multiple projects. If a con-
tractor has several claims against the
bond at once, the protection for each
individual will be less than the total
amount of the bond and may not be
enough to satisfy the damages.
Your insured’s plight is pretty common. We all get a little nervous when hiring contractors to work on our homes. The experiences of your insured’s friends have done little to instill her with confidence. She should seek out other acquaintances who might have had better experiences and get the names of the contractors they used. She can take other steps to make sure she hires a responsible contractor. Insurance has a limited role in the process. A license bond also might play a role. Your insureds should hire
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only bonded contractors to protect themselves from risks insurance is not designed to cover. But, really, the best advice is for your insured to do her homework.
STURBRIDGE, MASS. — McGrath Insurance Group of Sturbridge, Mass., announced that it has acquired Prouty Insurance Agency of Spencer, Mass.
Through its alliance with McGrath, Prouty Insurance can offer a greater choice of products, according to McGrath Insurance President and CEO Richard A. McGrath, CIC, LIA.
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“Prouty Insurance has a strong tradition of providing close, personal customer service,” said McGrath. “For an independent insurance agency, that means being able to offer customers insurance from some of the country’s leading carriers.”
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