Surety Bonds
Surety Bonds
A surety bond is not insurance in the ordinary sense. Insurance transfers risk from you to a carrier; a bond guarantees to a third party, the obligee, that you will fulfill an obligation, and if the surety pays a claim it has the right to recover that money from you. Understanding that distinction changes how you approach the underwriting conversation.
Bond capacity is credit underwriting. Sureties evaluate the classic three Cs, character, capacity, and capital, and they read your financial statements, work-in-progress schedules, and banking relationships closely. Building capacity is a process best started before the project you need it for, and we work with contractors to prepare that file in advance.
Three-party guarantees that you will perform an obligation, including bid, performance, payment, and license and permit bonds.
Coverage detail
What surety bonds typically responds to
The items below describe how this line generally behaves. Actual coverage is determined solely by the policy as issued, including its endorsements, exclusions, and limits.
Bid bonds
Guarantee that if you are awarded the contract you will enter into it and furnish the required performance and payment bonds.
Performance bonds
Guarantee completion of the contracted work according to its terms, protecting the project owner against contractor default.
Payment bonds
Guarantee that subcontractors and suppliers are paid, which on public work substitutes for the lien rights they would otherwise hold.
License and permit bonds
Required by state and local authorities as a condition of licensing for contractors, motor vehicle dealers, and many other regulated businesses.
Maintenance and warranty bonds
Guarantee workmanship and materials for a defined period after the project is accepted.
Fidelity and ERISA bonds
Protect against employee dishonesty and satisfy the bonding requirement for those handling employee benefit plan assets.
Who needs it
Businesses that should be reviewing this coverage
- Contractors bidding public work at the municipal, state, or federal level
- Subcontractors whose general contractors require bonding on private projects
- Newly licensed contractors satisfying state or county licensing requirements
- Businesses in regulated industries with statutory bond requirements
- Fiduciaries and plan administrators subject to ERISA bonding rules
Before you bind
Details that change how this policy performs
Single and aggregate capacity
Sureties approve a largest single job size and a total backlog limit. Knowing both before you bid prevents winning work you cannot bond.
Financial statement quality
Reviewed or audited statements prepared on a percentage-of-completion basis support meaningfully more capacity than internally prepared compilations.
Indemnity obligations
Nearly all bonds require personal and corporate indemnity. You are guaranteeing repayment to the surety, and that obligation survives the project.
Work in progress reporting
Current WIP schedules showing costs to date, billings, and estimated cost to complete are the single most useful document in a bond file.
Related coverage
Other lines to review alongside this one
- General LiabilityProtection against third-party bodily injury, property damage, and personal and advertising injury claims arising from your operations.
- Workers' CompensationStatutory coverage for employee medical treatment, lost wages, and rehabilitation after a work-related injury or illness.
- Commercial AutoLiability and physical damage coverage for owned, hired, and non-owned vehicles used in your business operations.
- Commercial PropertyCoverage for buildings, business personal property, tenant improvements, and the income you lose while damage is repaired.
- Inland MarineCoverage for mobile equipment, tools, property in transit, installation work, and other property that moves or sits away from your premises.
Get a surety bonds quote
Tell us about your operations and we will identify the coverage, limits, and endorsements your situation calls for.
Request a Quote