Win more business with a guarantee you’ll complete the work.
Surety bonds are designed to guarantee performance in the face of a set of particular risks. A surety bond is a promise to be liable for the debt, default, or failure of another. It is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee). Most important, it can help you win contracts by providing your customer with a guarantee that the work will be completed. There are two broad categories of surety bonds:
Contract Surety Bonds
Surety bonds that are written for construction projects are called contract surety bonds. There are four types of contract surety bonds:
- Bid Bond: Provides financial protection to the owner if a bidder is awarded a contract but fails to sign the contract or provide the required performance and payment bonds.
- Performance Bond: Provides an owner with a guarantee that, in the event of a contractor’s default, the surety will complete or cause to be completed the contract.
- Payment Bond: Ensures that certain subcontractors and suppliers will be paid for labor and materials incorporated into a construction contract.
- Warranty Bond (also called a Maintenance Bond): Guarantees the owner that any workmanship and material defects found in the original construction will be repaired during the warranty period.
Commercial Surety Bonds
Commercial surety bonds are required of individuals and businesses by the federal, state, and local governments; various statutes, regulations, ordinances; or by other entities. There are five types of bonds:
- License and Permit Bonds: Required by federal, state, or local governments as a condition for obtaining a license or permit for various occupations and professions. .
- Court Bonds (also called judicial bonds): Required of a plaintiff or defendant in judicial proceedings to reserve the rights of the opposing litigant or other interested parties.
- Fiduciary Bonds (also called probate bonds): Required of those who administer a trust under court supervision.
- Public Official Bonds: Required by statute for certain holders of public office, to protect the public from malfeasance by an official or from an official’s failure to faithfully perform duties.
- Miscellaneous Bonds: These are commercial surety bonds that do not fit into any of the types above.
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