The public bid
A city project requires a bid bond with every proposal, then performance and payment bonds from the winning contractor.
We line up the bid bond, then the final bonds once the contract is awarded.
Specialty Commercial Insurance
Surety bonds, to win the work and meet the requirement.
A surety bond is a guarantee that your business will meet an obligation, such as finishing a contract, paying subcontractors or following the rules of a license. Project owners, government agencies and courts often require one before you can work.
What surety bonds covers.
A bond isn't insurance for your business. It protects the party that requires it, called the obligee. If the surety has to pay a valid claim, you're expected to repay it under the indemnity agreement you sign, which is why sureties underwrite your business, finances and experience much like a lender would.
For contractors, the goal is usually bonding capacity: a surety relationship that supports the size and number of jobs you want to bid. For other businesses, it's getting the right license, permit or court bond issued quickly and correctly.
- Bid bondsGuarantee that if you win a bid, you'll sign the contract at your bid price and provide the required performance and payment bonds.
- Performance bondsGuarantee to the project owner that the work will be completed according to the contract.
- Payment bondsGuarantee that subcontractors, laborers and suppliers on the project will be paid.
- Maintenance and supply bondsGuarantee workmanship for a period after completion, or delivery of materials and equipment under a contract.
- License and permit bondsRequired by states and cities for many licensed trades and businesses, guaranteeing compliance with the rules of the license.
- Court, fiduciary and other commercial bondsBonds for appeals and other court matters, estates and trusts, public officials, utility deposits and similar obligations.
What it typically doesn’t cover
- It doesn't protect your businessA bond protects the obligee. Your business's own liability and property risks need insurance. General Liability & Products Liability Insurance
- Paid claims come back to youUnder the indemnity agreement, you and often the owners personally repay the surety for claims and costs it pays.
- Employee dishonestyTheft by your own employees is covered by crime insurance, sometimes called a fidelity bond. Commercial Crime Insurance
- Defective work you must fixA surety may step in when a contractor defaults, but the cost of correcting your own work is still your obligation.
Coverage descriptions are general summaries. Actual coverage is governed by the terms, conditions and exclusions of the policy issued. Availability varies by state and carrier.
Real-world examples
What a claim can look like.
Claims rarely look dramatic at the start. They usually begin with an ordinary day, an email or a phone call.
The new license
A contractor expanding into a new state needs a license bond before the state will issue the license.
A license bond can usually be issued quickly once underwriting is complete.
The unpaid supplier
A subcontractor's supplier says it wasn't paid on a bonded project and files a claim on the payment bond.
The surety investigates and may pay valid claims, then seeks repayment from the principal under the indemnity agreement.
Examples are illustrative. Whether a claim is covered depends on the facts and the terms, conditions and exclusions of your policy.
Often paired with
General Liability & Products Liability InsuranceThird-party bodily injury, property damage and products-related claims.Commercial Crime InsuranceCoverage for financial losses resulting from employee theft, forgery, fraud and other covered criminal acts.Workers' Compensation InsuranceMedical care and lost wages for employees injured on the job.Umbrella & Excess Liability InsuranceAdditional liability limits above underlying commercial liability policies.Questions
Common questions about surety bonds, answered.
What's the difference between a surety bond and insurance?
Insurance protects your business against losses. A surety bond guarantees that your business will meet an obligation to someone else, and if the surety pays a claim, you're expected to pay it back. It works more like credit than insurance.
What is bonding capacity?
Bonding capacity is how much bonded work a surety will support, both for a single job and across all your jobs at once. It's based mainly on your financial strength, experience and work in progress, and it can grow as your business does.
How quickly can I get a bond?
Many license and permit bonds can be issued quickly once the application is complete. Contract bonds take longer the first time, because the surety reviews your financials and experience to set up a bond program.
Do I need good credit to get bonded?
Credit matters, especially for smaller bonds and newer businesses, but it isn't the only factor. Financial statements, experience and the type of bond all play a role, and some markets specialize in harder-to-place bonds.
How much does surety bonds cost?
Bond premiums are a percentage of the bond amount, set by the type of bond and your credit, financial strength and experience. Contract bonds also depend on the size and terms of the job and your work in progress. We compare options across our carrier relationships so you see real prices for your business, not an average.
Talk to an advisor
Let's get this fitted properly.
Tell us about your business. A principal will review your needs, shop the market and walk you through the options in plain English.