Construction Bonds

Construction bonds, also known as contract bonds, are a category of surety bonds that provides a guarantee that a contract will be fulfilled. Contract bonds can be used in a wide range of circumstances, but they are most commonly required in construction projects, which is why they have been deemed construction bonds.

Simply put, construction bonds provide assurance that the project developer will recover any financial losses if the contractor doesn’t complete a contract.

Construction bonds

Construction bonds are most often required by government agencies for work on a public project. However, more private companies are beginning to require the protection of construction bonds, too. There are many types of construction bonds that may be required at different stages of a project to ensure it is completed according to the contract.



Here are some of the most common types of construction bonds:

Bid Bond

For developers who are accepting bids on a project, this surety bond ensures that contractors submit serious bid proposals since the project developer is able to make a claim against the bond if the contractor declines the job or retracts the bid.

Contractor License Bond

For contractors who are looking to establish their business, a license and permit bond is required for contractors to receive their state, county, and/or city license.

Environmental Bond

For contractors, this specialty bond guarantees that they adhere to state and federal rules and regulations aimed at remediating environment damage. It also serves to mitigate perceived contractor notions as "environmental risks."

Maintenance Bond

For project developers that require insurance for contractor work, this surety bond provides assurance against defective materials and workmanship for a specific period of time after the completion of a project.

Performance Bond

For private project developers and government agencies, this surety bond guarantees that the contractor completes the project according to the contractual terms. If the project does not meet the contract standards, a claim can be made against the bond to hire another company to complete the contract.

Payment Bond

For contractors who hire suppliers and subcontractors, this surety bond offers protection to suppliers, subcontractors, and others who may work on a project in the event that the lead contractor goes bankrupt during the course of the project.

Site Improvement Bond

For renovation contractors, this surety bond covers the completion of contracted improvements to renovation projects that update older structures or other existing properties.

Subdivision Bond

For contractors working on subdivision project, this surety bond maintains responsibility of the contractor to build and/or renovate public structures within subdivisions, such as streets, sidewalks, and waste management systems, according to governmental specifications.

Supply Bond

For project suppliers, this surety bond requires material, equipment, and other suppliers to complete orders as defined in the purchase order or agreement.

Liked this content? Share it!