Contractors Bond

What is a Contractors Bond?

A contractors bond is a type of surety bond.  There are many types of contractor bonds which we’ll describe below:

  • Contractor License Bonds – These bonds help when a project doesn’t meet local codes.
  • Performance Bonds – These bonds guarantee the performance of a construction contract.
  • Payment Bonds – These bonds ensure payment of most subcontractors and suppliers.
  • Bid Bonds – These bonds ensure a contractor will enter into a final contract.
  • Maintenance Bonds – These bonds guarantee any needed repairs to the contractor’s work.

Why do I need a Contractors Bond?

It depends on your situation.  Performance and payment bonds are needed when your company contracts for public work.  They Federal Miller Act and Little Miller Acts require these bonds to protect taxpayers money.  These surety bonds can provide money to complete the job if a construction firm violates their contract.

Bid bonds are used when bidding on public projects.  They provide money to rebid the project if a contractor does not honor their bid.  Additionally, it can cover the costs to award the contract to the second lowest bidder.

Contractors need maintenance bonds when they finish a project.  These bonds guarantee the contractor will fix their work if it fails.

Registered contractors often need license bonds.  States, counties, and towns use these bonds to guarantee code compliance.  In most cases, contractor license bonds provide money to pay unpaid fees and assessments.

What does a Contractors Bond cost?

A contractors bond cost can vary depending on the bond type.  However, the average cost is usually 1-3% of the bond amount needed.  For example: Most contractor license bonds cost $100 but performance bonds can cost much more depending on the contract size.  Bid bonds are usually free as the surety company charges premium on the performance bond if the contractor wins the job.

How do I apply for a Contractors Bond?

You contractors bond application depends on the type of contractors bond needed.  All surety bond quotes are non-binding and free until you purchase your bond.  There is no obligation to proceed with any quote you receive.  The easiest way to apply is by completing our online application or visiting our individual bond pages for more information.  You may also email us at or call us at 386-316-2547 and we’ll be happy to answer any questions you may have.

How does a Contractors Bond work?

As with all bonds, there are three parties involved in the agreement.  The first is the “principal” which is you and/or your company.  The second is the surety company who writes the bond on your behalf.  The last party to a bond is called an “obligee”.  An obligee is the person or entity that you are bonding to.  This is often a local government, project owner, or general contractor.  The bond acts as a financial guarantee for certain claims against you or your company which violate the underlying contract, statute, or administrative rules entered into.  However, you are responsible for paying the surety company back all of the costs it incurs on your behalf.  Think of a surety company as sort of a cosigner.  If you can’t or won’t pay for a valid claim than they most likely will.

Learn more about contractors license bonds