Contractor Surety Bonds
A three-party guarantee that you'll meet your contractual and licensing obligations — license/permit bonds, bid bonds, and performance bonds for contractors of every size.
A surety bond is a three-party agreement between you (the principal), the entity requiring the bond (the obligee — often a state licensing board, municipality, or project owner), and the surety company that issues the bond. It guarantees that you'll meet a specific obligation — holding a license in good standing, honoring a bid, or completing a contracted project.
Bonds are not insurance in the traditional sense: if a valid claim is paid out against your bond, you're generally required to reimburse the surety. That structure is what makes bonds function as a guarantee to the public and to clients, rather than a loss-sharing pool the way insurance works.
For contractors, the most common bonds are license/permit bonds (required to hold a contractor's license in many states and cities), bid bonds (guaranteeing you'll honor a submitted bid), and performance bonds (guaranteeing you'll complete a contracted project according to its terms).
Why It Matters
Common Claims Contractor Surety Bonds Responds To
Licensing Lapses
Many states will suspend or deny a contractor's license renewal without a current bond on file.
Bid Withdrawal
Withdrawing an accepted bid without a valid bond in place can trigger a claim from the project owner.
Non-Performance
Failing to complete a bonded project according to contract terms can trigger a performance bond claim.
Unpaid Subs/Suppliers
On bonded public work, unpaid subcontractors or suppliers can file a claim against your payment bond.
What's Covered
What's Included
License & Permit Bonds
Required by many state licensing boards and municipalities before issuing or renewing a contractor's license.
Bid Bonds
Guarantees you'll honor your submitted bid and enter into the contract if awarded the job — common on public and larger commercial work.
Performance Bonds
Guarantees you'll complete a contracted project according to its terms, protecting the project owner if you default.
Payment Bonds
Guarantees subcontractors and suppliers on a bonded project get paid, often required alongside performance bonds on public work.
Cost Factors
What Affects Your Premium
- Bond amount required
- Your personal/business credit standing
- Time in business
- Bond type (license vs. bid vs. performance)
Typical Range
Bond premium is typically a small percentage of the total bond amount, based on your qualifications — cost varies by bond type, amount, and credit standing. A quote based on your specifics is the only accurate number.
Every business is different — the only way to get an accurate number is a real quote based on your trade, revenue, payroll, and claims history.
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Contractor Surety Bonds Questions
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