Non-Construction Performance Bonds
Non-Construction Performance (NCP) surety bonds guarantee “non-sticks-and-bricks contracts." This includes any contract that does not relate to a building or construction job. NCP bonds include: Service contracts; Supply contracts; Supply & Install and/or Fabricate & Supply.
Service and supply businesses must have an NCP bond if the contract is a certain size and uses public money. NCP bonds are also required by many business contracts between two private parties.
SERVICE CONTRACT BONDS
Service contract bonds guarantee the principal will perform a specific service, at a set price, for an agreed upon time period.
There are two ways to write the contract.
- The contractor receives a fixed amount for the entire term of the contracted service.
- The contractor receives payment each time the service is performed over a set period of time.
If the contractor fails to perform the service, the surety must replace the contractor or reimburse the customer or "obligee" for losses.
SUPPLY CONTRACT BONDS
Includes Fabricate & Supply; Supply & Install
These bonds guarantee the delivery of material, equipment or other supplies as outlined in the contract. Supply bonds give financial protection to the purchaser of the materials. If the supplier fails to deliver the goods within the time and quality constraints of the contract, the surety pays for the cost of the missing materials.
To consider an NCP bond, we need:
- A completed NCP bond application
- A copy of the contract documents
- The required bond form (if applicable)
- Business and personal financial statements and indemnity (when the bond is greater than $75,000)
HOW DO I GET A SURETY BOND?
Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.
WHAT IS A SURETY BOND?
A surety bond is a three-party agreement that ensures the fulfillment of a commitment or contract. For instance, the surety (Merchants Bonding Company (Mutual)) may provide a surety bond to a construction company (the principal) which is required by the state (the obligee), ensuring the construction company will perform the duties as outlined in the contract. In bonding the construction company, Merchants assumes the risk should the company default or not fulfill their contract. A surety bond is different from traditional insurance in that the principal is obligated to pay back the surety company on any claims paid out.
All information provided is subject to change.