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A Maintenance Bond, also known as a warranty bond, guarantees to the project owner, that within a certain maintenance term after the project’s completion, there will be no faults in the structure. A maintenance bond guarantees for the quality of workmanship and the materials used. The maintenance bond that is purchased remains active only for a certain period of time, after which, any financial loss from defects or issues found with the contractor’s work will not be covered by the bond. If after the completion of a construction project, say a building, the client finds that the structural framework was not satisfactory, it could file a claim against the bond during the maintenance term. If the surety company finds the claim to be valid, it will compensate the obligee for any losses and damages incurred. In turn, the contractor must indemnify the surety for any compensation it makes to the obligee.

Submissions under $450,000.00: One Page Application

2% rate or higher based on credit

1 page application

Please include contract and bond forms

Please include personal financial statements

2 day turnaround

Submissions over $450,000.00

Rates start at 1% to 3% based on credit, experience, etc.

1 week turnaround on new submissions

Document Downloads
Application: Call underwriter for appropriate application at 1-818-715-7133

FAQs About Maintenance Bonds

We want you to feel comfortable working with our surety bond company and realize you may still have questions. Our FAQ section below will help you understand more about our business and what we do. Let’s learn more!

What Is a Maintenance Bond?

A maintenance bond, also known as a warranty bond, is a financial guarantee that protects the owners of a completed construction project from defects that might arise during a specific period.

Warranty or maintenance bonds for construction are a type of surety bond. As such, they guarantee that contractors will fix any problems that occur after the project is completed.

Builders who strive to maintain a good reputation in the industry often offer warranties. However, maintenance bonds take such promises to the next level by establishing a contractual obligation.

In other words, these bonds make contractors financially responsible for fixing defects in materials, design, and workmanship that might arise during the warranty period.

Although both are frequently mistaken because they offer protection against additional and unexpected costs to the project owner, maintenance bonds aren’t technically insurance policies.

How Do Maintenance Bonds Work?

There are three parties involved in a maintenance bond agreement. These are:

  • The principal: Typically, the “principal” is the contractor, subcontractor, or builder on a construction project.
  • The obligee: In essence, the obligee is the party that has hired the principal. Project owners or groups, public entities, and general contractors may fall into this category.
  • The surety: In a maintenance bond agreement, the surety is the company that provides the bond.

If there are defects or the project doesn’t meet standards after completion, the obligee can file a claim to get funds for repairs. The surety company will pay repair costs, but contractors will be required to reimburse them for that amount.

What Is a Warranty Bond? Is It the Same Thing as a Maintenance Bond?

Technically, they’re the same thing. Since maintenance bonds guarantee that the owner of a completed construction project is protected against possible defects and faults, they’re also known as “warranty bonds.”

Maintenance Bond Vs. Warranty Bond: Is There a Difference Between the Two?

Although both terms are often used interchangeably, the truth is that a warranty bond can be different from a maintenance bond depending on the context.

Maintenance bonds focus on the contractor’s duty to repair defects that occur during a maintenance period.

Although similar, warranty bonds typically offer broader protection, extending beyond maintenance to cover malfunctions, defects, and performance issues.

What Defects Are Bonded Builders Required to Fix?

As mentioned, maintenance bonds are a type of construction bond that creates a financial obligation for bonded builders. This warranty makes them financially responsible for fixing defects and faults that may occur if the work isn’t done correctly.

A warranty bond guarantees that contractors will remedy any issues involving the project design, workmanship, and materials used. These are some examples:

  • Worker mistakes
  • Design flaws, deficiencies, or weaknesses
  • The use of substandard materials
  • Poor workmanship
  • Unsatisfactory structural framework

Unless otherwise stated in the contract, a maintenance surety bond is limited to defective materials, design flaws, and issues involving workmanship. However, in some cases, this warranty covers regular wear and tear for a specific period.

Are Maintenance Bonds Required by Law?

Unlike performance and payment bonds, which are also used in the construction industry, maintenance bonds aren’t required by law.

The obligee may require them at their discretion if they consider it necessary to have additional protection beyond the guarantees granted through the contract documents.

What Are Performance Bonds? How Are They Different from Maintenance Bonds?

A performance bond is another type of surety bond. It ensures the builder will complete the project to the standards set forth in the contract by guaranteeing they’ll fulfill all of their obligations under the construction agreement.

While both protect construction project owners from poor workmanship, there are important differences between performance and maintenance bonds, including the following:

  • Both types of bonds are required in the construction process but in different phases.
  • Performance bonds guarantee that a project will be completed according to the terms set forth in the contract.
  • Maintenance bonds guarantee that contractors will maintain such projects for a specific period after they’re completed.
How Much Does a Maintenance Bond Cost?

The cost of a maintenance bond may vary depending on several factors. However, it’s often a portion of the total bond amount. This percentage is determined by the surety based on the following:

  • The principal or contractor’s credit score
  • The amount of coverage required
  • The principal or contractor’s financial records, such as cash flow statements and income statements
  • The principal or contractor’s experience in construction projects

More often than not, the cost of a maintenance bond for contractors with excellent credit scores ranges from 1% to 4% of the total bond amount.

Do you want to know the cost of the maintenance bonds you need for your upcoming project? S Philips Surety & Insurance Services can help! Fill out our form and get a quick quote today!

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