There are two main categories of surety bonds: contract and commercial. Contract surety bonds guarantee a specific contract. Examples include performance, bid, supply, maintenance, and subdivision surety bonds. Commercial surety bonds guarantee per the terms of the bond form.

Performance – is a surety bond issued b an insurance company to guarantee satisfactory completion of a project by a Contractor. Ex: A contractor may be required to post a performance bond in favor of a client for whom the contractor is constructing a building. If the contractor fails to construct the building according to the specs provided in the contract, the client is guaranteed compensation for monetary loss up to the amount of the bond. In the case that does happen, the Surety will generally bring in a replacement contractor to finish the job.

Bid Surety – guarantees that a contractor who is awarded a project on which he placed a bid will be able to post a performance bond as required, and proceed with the project.

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