BUSINESS INSURANCE
Business insurance is about minimizing the risks of owning and operating a business. It’s about protecting your investments in your company including buildings, vehicles, equipment, and supplies as well as products and inventory. Business insurance also provides liability protection for the activities of the business – whether for employees who may suffer an injury on the job or mishaps that may result in harm to the public or damages to other people’s property.
If you own a business or are in the process of starting a new enterprise we would appreciate an opportunity to learn about your business and provide a customized proposal for insurance protection. Simply give us a call at +6281285700944 or request a quote below and we’ll get in touch with you.
SURETY BOND
SURETY BOND is a form of guarantee in which the Obligee (work/project owner) usually requests a Letter of Guarantee from the Principal (contractor/contractor) with the aim of stating the Principal’s seriousness in carrying out the work according to the agreed contract/agreement. The guarantee is provided by a Guarantor (Surety) issued by a Non-Bank Financial Institution, namely an Insurance Company that has a Surety Bond program.
A Surety Bond is an additional agreement to the main agreement (contract/agreement) between the Principal and the Obligee, which states that if the Principal fails/cannot fulfill its obligations to the Obligee, the Surety will pay the Obligee the losses suffered up to a maximum of the value of the Surety Bond.
The obligation in a Suret Bond is a joint responsibility or responsibility where the guarantor (Surety) will pay the loss in cash if it is clear that there is a loss and for this reason there has been a claim. On the other hand, the Principal, with an Agreement on Compensation to the Surety (Indemnity Agreement), will pay back to the Surety the amount of losses that have been paid by the Surety to the Obligee.
Surety Bonds are classified as Financial Guarantees which are generally carried out by banks where the provision of guarantees is carried out with 2 (two) characteristics, namely:
Conditional Guarantee (Conditional Bond)
The guarantee will only be disbursed after the causes of the disbursement are known and the Guarantor is only obliged to compensate for the loss suffered by the Obligee.
Surety Bonds are Conditional because the issuance carried out by Insurance Companies is different from Bank Guarantees which have the privilege of not asking for collateral.
This is possible because the Insurance Company as Guarantor can enter into a compensation agreement with the Principal. The compensation agreement is signed by the Principal and the Indemnitor before or at the time the guarantee is issued. This means that every disbursement of collateral paid to the Obligee must be accounted for by all parties and on that basis the Principal and Indemnitor are willing to pay back the disbursement that has been made.
For this reason, in the event of a claim for disbursement of collateral, it must first be proven that the loss has occurred or that there is a Loss Situation and that an official Termination of Employment has been carried out.
The things that need to be examined as a basis for determining the disbursement of collateral are:
- Reasons for non-fulfillment or implementation of the agreement
- Rights and obligations of each party
- Achievements and work that has been carried out
- The amount of loss suffered by the Obligee.
Unconditional Guarantee (Unconditional Bond)
The guarantee will be disbursed if the provisions in the contract are not fulfilled without having to prove failure (Loss Situation). This guarantee is usually given by banks to their customers (Bank Guarantee).
When providing collateral, banks generally ask for sufficient collateral to support the guarantee. Apart from that, a certain amount of cash guarantee deposit (collateral) is also required which must be kept at the bank without interest and can only be withdrawn after the Bank Guarantee ends.
The types of guarantees classified in Surety Bonds are as follows:
- Bid Guarantee (Bid Bond)
Guarantee issued by the Surety Company to guarantee the Obligee that the Principal holding the Bid Bond has fulfilled the requirements determined by the Obligee to participate in the auction/tender and if the Principal wins the auction/tender then he will be able to close the Work Implementation Contract with the Obligee.
The amount of the Guarantee Value is a certain percentage of the Principal Bid Value (the Guarantee Value does not reflect the Project Value itself), the Collateral Value is the Penal Sum which is the Maximum Value in the Bid Bond and ranges between 1% to 3% of the Project Bid Value (in accordance with RI Presidential Decree No. 80 of 2003)
The Bid Guarantee is only valid at the time of the auction/tender. - Performance Bond
Guarantee issued by the Surety Company to guarantee the Obligee that the Principal will be able to complete the work given by the Obligee in accordance with the provisions agreed in the work contract and also as a condition for signing the work contract for the auction/tender winner.
The amount of the Guarantee Value (Penal Sum) for Implementation is a certain percentage of the Project Contract Value itself, namely between 5% to 10% of the Project/Work Value.
The Performance Guarantee is valid until the Principal carries out his work/obligations properly according to the contract. - Advance Payment Guarantee (Advance Payment Bond)
This guarantee is also a condition if the Principal takes an Advance Payment for the purpose of facilitating financing for the project he is working on.
The amount of the Guarantee Value is a certain percentage of the Project Contract Value itself, namely 20% of the Project Contract Value. - Maintenance Guarantee (Maintenance Bond)
Guarantee issued by the Surety Company to guarantee the Obligee that the Principal will be able to repair deficiencies/damages that may arise during the maintenance period after the work has been completed as agreed in the contract.
Required documents:
Send a Letter of Application for Surety Bond issuance on Company Letterhead containing:
- Company Name (Principal)
- Complete address
- Name of Obligee (Giver/Owner of
work/project) - Complete address
- Job/Project Name
- Job/Project Location
- Job Value
- Collateral Value (required by
the Obligee) - Timeframe/Period
- Supporting Documents (according
to the type of Surety Bond issuance) - Company Bio Data (Principal)
- Indemnity Agreement
BID BOND SERVICES
What Is a Bid Bond?
Bid bonds provide financial assurance to owners by guaranteeing that contractor bids are submitted in good faith. With a bid bond, a contractor enters into a contract at the amount bid and posts the appropriate performance bond. Owners use these bonds to pre-qualify contractors submitting proposals on contracts.
Bid Bond vs Performance Bonds
Bid bonds guarantee that the contractor’s bid is accurate and that they will sign and complete the contract. Performance bonds guarantee that a contractor will not default on the contract and will perform all work properly. An experienced bid bond company like Brunswick can help you understand and apply for the bonds you need.
How Does a Bid Bond Work?
Bid bonds are put in place to help prevent contractors from submitting unsuitably low bids to win a contract.
When contractors are needed to complete a construction job, a construction bidding process begins to find the best and most cost-effective contractor to assume the job.
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- Multiple contractors submit their estimated job competition cost to the owner in the form of a bid
- The contractor who wins the bid is given a contract for the construction project
A construction bid bond is needed to ensure that the contractor who wins the bid will honor bid terms after the contract is signed. If a contractor breaks bond terms, the owner must find another contractor. A bid bond compensates the owner for the cost difference between the contractors.
Bid Bond Requirements
Surety bid bond requirements can be met in several ways:
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- Bid bonds can be issued by an approved corporate surety agency
- Bid bonds can be issued by an individual surety that guarantees certain defined types of assets
- Individuals can act as sureties to satisfy bid bond requirements if they have sustainable assets to support the bond(s)
Bid Withdrawal & Bid Security
If a bid is withdrawn before the bid is opened, the bid deposit is returned to the bidder. No action is taken against the bidder or bid security if a bidder is permitted to withdraw the bid before award.
Conversely, after bid opening without forfeiture of the bid deposit, a successful bidder may not withdraw the bid unless the bidder establishes by clear and convincing evidence that a nonjudgmental mistake was made in the bid. If withdrawal of a bid after bid opening is permitted, no action may be taken against the bidder or bid deposit.
What is a Letter of Bondability?
Whether it’s called a Good Guy Letter or a Sunshine Letters, these documents are evidence of a relationship between the contractor and a surety company. Depending on the surety, the letter might confirm the length of the relationship and could give information about the surety’s financial standing. A letter of bondability could provide general parameters on the limits of the type of bonding the contractor could qualify for from the surety.
However, the letter of bondability is not a prequalification for a specific job, nor does it make any promises about whether the contractor could be bonded for that job. If a project owner wants this information for a contractor, they should request that the contractor get a bid bond instead. Bid bonds are underwritten by the surety and provided only to those contractors who can be bonded for a specific job and amount.
Why Choose PETROL
PETROL is surety bonding specialists guide clients in the construction industry through the process of obtaining a bid bond and other contract bonds.