What is a Construction Bond?

Construction Surety Bonds fall under the category of CONTRACT BONDS. These specific types of surety bonds ensure that the contract requirements, under which the scope of work is defined, are met. Contract bonds are most popular in the construction industry, which is why contract bonds may also be called construction bonds.


Construction companies and contractors are required to obtain a Contractor’s Bond for any government project. Private developers typically are required to take out a Contractor’s Bond if the budgeted project exceeds a certain threshold. They outline these specifications in the contract that lays out the requirements for the project.

Underwriters write the bond’s terms according to the contract. If any part of the contract is breached or requirements are not met by the contractor, a claim can be made on the bond. If a claim is made, the bond is designed to front the money for these claims and a bond company can help fight the claim if the bonded party is in the right.

Construction Surety Bonds


Bid Bonds

These specific bonds protect the project developers from unsavory bid practices. If a contractor places a bid on a project and retracts the bid, the developer can make a claim on the bid. The reasons for a contractor to remove a bid that may create a claim including not having the proper financial requirements or means to complete the job. These bonds are in place to ensure that all submitted bids are from serious contractors.

Contractor License Bonds

Some bonds are required before someone can earn their professional license. There are many types of LICENSE AND PERMIT BONDS and a variety of license bonds to serve the construction industry. These bonds ensure that the professional applying for license credentials to ensure they follow all laws and regulations pertaining to the license.

Maintenance Bonds

Maintenance Bonds protect the project developer. That could be a homeowner or a government entity sourcing a job to a construction company. If the completed work has been inspected and deemed defective, a claim can be made on the bond. The payout from the bond is designed to pay for any repairs or reconstruction needed to fix the issues.

Payment Bonds

Construction projects can get very expensive and oftentimes the construction company is responsible for the upfront costs. If the construction company goes bankrupt in the middle of the project, a payment bond guarantees payment of services. These payments may go to workers, suppliers, and any entity the lead contractor is indebted to from the bonded project.

Performance Bonds

Performance bonds ensure that the project is completed to the specifications outlined in the terms of agreement. The blueprints and project contracts specify the requirements for the job. A claim can be taken on a performance bond if they do not meet these terms. The Federal Miller Act requires a performance bond on any federally funded project over $100,000.

Site Improvement Bonds

These bonds are similar to performance bonds, but a site improvement bond specifies work done to a pre-existing structure. The same requirements are needed to make a claim, in which the project was not completed to the specifications outlined in the terms.

Subdivision Bonds

Subdivisions include things like sidewalks, streets, public plumbing and more. Subdivision Bonds ensure that work done on a structure will be completed with the local regulations of these public works. A claim can be made against the bond if these regulations are not met.

Supply Bonds

One of the few Construction Bonds that benefits the contractor, these bonds ensure all supplies ordered are delivered according to the purchase order. If a supplier cannot provide the required materials, equipment, or supplies, then a claim can be filed on the bond.

It is important for contractors in every industry to secure bonds and insurance for their business. Oftentimes, these terms get confused for one another, and it is important to know the difference and why you would need to acquire both. Bonds are there for the clients of the contractors to assure them that work will be completed as stated in the agreement between customer and contractor. Insurance is there to protect the contractor’s business in the event of a catastrophic event. It is important to have both, as many states require contractors to carry a surety bond for their business and proper insurance.

Here at Safeline Surety Bond, we have been helping contractors and companies get bonded for their company. Surety bonds vary in their coverage, and it is important to know which bond your business needs. Our company has been providing surety bonds for over 15 years, and we can confidently say we’ve seen it all. This means that we know how to cater our bonds to your exact business needs. Learn more about the different industries HERE and find the surety bond that works best for you and your business.

How to Apply for a Surety Bond

Click the button and fill out the form to start the application process. We work with the top markets in the industry to get you a fair rate. People who get surety bonds from Safeline Surety Bond never have to pay the full bond amount. Find out how much we can save you today!