A surety bond ensures contract completion in the event of contractor default. A project owner (called an obligee) seeks a contractor (called a principal) to fulfill a contract. The contractor obtains a surety bond from a surety company. If the contractor defaults, the surety company is obligated to find another contractor to complete the contract or compensate the project owner for the financial loss incurred.
Most commonly, surety bonds are known for:
- Assuring the completion of a variety of construction projects; i.e. schools, roads, office buildings, hospitals, etc.
- Facilitating compliance with state laws and regulations.
- Protecting against breach of fiduciary, or government-backed, responsibilities.
- Guaranteeing the payment of contractors.
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Types Of Surety Bonds.
There are four types of surety bonds:
Bid Bond: Ensures the bidder on a contract will enter into the contract and furnish the required payment and performance bonds if awarded the contract.
Payment Bond: Ensures suppliers and subcontractors are paid for work performed under the contract.
Performance Bond: Ensures the contract will be completed in accordance with the terms and conditions of the contract.
Ancillary Bond: Ensures requirements integral to the contract, but not directly performance related, are performed.
We can work with you to determine what coverage best fits your needs. We’ll walk you through the process, every step of the way, to make sure your policy provides protection and peace of mind.