Surety bonds are an additional risk mitigation tool to add to your current insurance coverage. They guarantee payment if certain contractual conditions are not met.

Surety bonds involve three parties:

Obligee – party requiring the bond

Principal – party needing the bond

Surety Company – party supplying/underwriting the bond


Types of Bonds


License/Permit Bonds

This type of surety bond is required by government, either federal, state, or municipal, as part of the licensing process for a business. License and permit bonds guarantee a licensed business will act according to regulations and laws for a given profession. Common professions requiring a license and permit bond are contractors, electricians, plumbers, and non-resident professionals.

Bid Bond

Bid bonds guarantee the awarded contractor of a project will sign the contract per the bid submitted. This type of surety bond assures a project owner that the contractor submitting a bid can complete the project.

Payment Bonds

This type of surety bond ensures a contractor will pay the subcontractors, material costs, and labor accrued on a project, per the contract. Payment bonds are particularly important for jobs where
mechanic liens cannot be issued. These bonds protect the subcontractors and laborers.

Performance Bonds

Payment and performance bonds are usually issued together; however, they are not the same. Performance bonds are a type of surety bond that guarantees satisfactory completion of a project.
These bonds protect the project owner against a contractor’s failure to complete a project as agreed.

Maintenance Bonds

Maintenance bonds protect against financial losses due to faulty workmanship or materials used in a construction project.

Financial Responsible Officer Bond

The owner/officer, primarily in charge of the financial responsibility of a company, may be required to carry a Financial Responsible Officer bond. This bond ensures officers with financial responsibility of a company will adhere to applicable laws.

Right of Way Bonds

These bonds are required when performing work on a city road, right of way, or easement. This bond may be required prior to obtaining a Right Of Way permit.