All You Need to Know About Contractor Surety Bonds

A Surety bond can be defined as a type of contract which involves three parties, where one party needs to pay another party a certain amount or fulfill a promise. The third party assumes liability for any failed obligation; in a nutshell, three parties are involved – the ‘Principal,’ the ‘Obligee,’ and the ‘Surety.’

The” Principal'” here is the client who buys the bond under contract premise and agrees to pay the “Surety” premiums. In turn, the ‘Surety’ promises to pay the ‘Obligee’ compensation in case the ‘Principal’ breaches the contract of payment and fails to pay the ‘obligee’ what was promised.

A Contractor Surety Bond is purchased by a contractor who ventures into projects and wishes to give assurance that the investment will be directed towards the specific goal. The bonds are managed by the State, and forestall ventures getting deferred due to illegal malpractices by contractors.

In short a project owner or oblige enters into a contract to bond contractors and complete a specified project. Then the contractor or principal secures a surety bond from a surety company or surety broker who sells contractor’s license bonds. Local surety brokers can be found throughout online searches by looking under, “bond directory“.

In any federal, state or local government project the contractor is required, by law, to be bonded to bid. In fact, some areas require a bond be in place before they even consider issuing a contractor a construction license.


Bonds don’t only protect the project owner they work to cover subcontractors that are hired to complete projects that are contracted. The surety bond will cover the expense of suppliers, subcontractors, and damage that occurs to the property as a direct result of the construction project as well as tools and materials that are damaged or stolen.

Construction Surety bonds are only sold through certain agencies that are known as bond producers or bond agencies. The job of a surety agency is to work with contractors throughout the entire process of obtaining a bond as well as creating a relationship where they continue to supply bonds to the contractor as their construction companies grow and take on new commitments. A bond producer plays an important role. They should provide the following services:

The surety company offers advice that increases the profitability of the company by looking into management and all the technical aspects of the business.

To ensure that the financial requirements are met by the contractor seeking a surety bond, the company is responsible for reviewing all financial documents that are required by contractors seeking bonds.

The surety company is responsible for ensuring that the contractor has a surety bond that matches up with their needs. Most surety producers have relationships in which they offer bonds to more than one company. With this in mind, it is important that the surety producer can maintain relationships with several various surety carriers at one time.

The main point of contact for a contractor is the surety producer. This remains the same throughout the entire bonding process. The surety company must remain in contact with both the contractor and the carrier throughout the entire process of the project

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