contractor holding his bid documents for tender date


In the United States, when handymen, repairmen, or contractors do work inside a home or business they must acquire what is known as a construction bond. While these bonds are required by law, it doesn’t make them any easier to understand. If anything it makes them all that much harder.

This is especially true for those just getting into the business. They can be confusing enough for the established construction contractor, but to the new one, they can be like speaking a foreign language. Luckily, you are about to learn everything that you could possibly need to know about these bonds.


Surety bonds for construction projects are pretty much nothing more than a contract between three parties. This would be the contractor, the customer, and the issuing party of the bond. These bonds offer the customer protection from failure to deliver on services. Whether the services don’t get done per standards or don’t get completed at all, this bond will step in and do what is needed to get the job done.

The company that issues the bond, which is usually an insurance provider or surety bond company, like Stokes Surety Bonds, will pay the customer to have the job finished or fixed. This company will then likely seek out the contractor or the individual that took out the bond for reimbursement.

To learn more about this in detail, please take a look at the following links:

•  Bid Bonds

Performance Bonds

Maintenance Bonds

Subdivision Bonds


When it comes right down to it, there are many different reasons that one will want to take advantage of these bonds. That being said, the number one reason to take out a bond like this is that it is required by law in many states.

Operating without one would mean that you are doing to illegally. However, just because a bond like this isn’t required by law, it doesn’t necessarily mean that the customer won’t request one. Not doing so in these cases can either result in a lawsuit or you not getting the job. These bonds are extremely important to the customer because they act as a sort of assurance that the work will get done.

These bonds are even so more important when it comes to larger projects. And that’s why when it comes to larger projects there are usually two parts involved. One will involve ensuring that the job is completed. The other part of the bond will ensure that the materials and subcontractors will properly be paid. Not doing so could result in the project not being completed.

If one thinks about it, they could say that a construction bond is nothing more than an insurance policy ensuring that the project will be completed. That’s pretty much what they are, as they can offer protection for both the project owner and the individual performing the work. That’s right as much as it might not seem like it, this bond does protect 2 of the three parties involved here. How does the construction bond help the contractor? Well, if there is a sudden problem with cash, this bond can step in and offer protection.

To learn more about this in detail, please take a look at the following links:

 •  How Does a Construction Bond Work?

  How Does a Bid Bond Work?

  How Does a Performance Bond Work?


While it might seem like a hassle and another unneeded expense, contractors will also need business insurance before they even apply for a construction bond. And, this is because business insurance simply acts as another type of protection. For instance, business insurance can payout when the customer’s property is damaged, when accidents or third-part damage occurs, if there is slander, if an employee is injured on the job, and tons more.

Just imagine these scenarios – an employee is smoking on the job and throws out a cigarette in the customer’s yard. That butt ends up igniting flammable materials and causes immense property damage. Or, what about if an employee is working on the roof and drops a box of shingles that land on a customer. In both of these scenarios, there would likely be immense amounts of money involved. Money not only to have the property repaired from the fire but financial costs to get the customer back on their feet. What if the shingles kill the customer?

Whatever the situation and the potentials, construction insurance adds that extra layer of protection. While construction insurance will also protect you and your company in the event that the customer wants to sue due to the incident, the construction bond will more likely approve the contractor. This is why it is important to take out these types of bonds even if they aren’t required by law or requested by the customer.

To learn more about insurance for different types of construction bonds in detail, please take a look at the insurance coverage of bid bonds .


When dealing with construction bonds, there can be three different types of bonds available. Once again, not all three of these bonds are usually required by law, but they can be in specific situations. And, just because they are required by the law, it doesn’t necessarily mean that the customer won’t require them. All that being said, the three types of construction bonds that you can run into are the bid bond., the performance bond, and the payment bond.


Bid bonds are going to be pertinent for any contractor that is bidding on a project. This type of bond, as you’ve likely guessed, is a guarantee with the bid.

It ensures that the contractor bidding on the job does in fact have the resources and means to complete the project they are bidding on.

The bidding process itself can sometimes be months long and take immense amounts of resources. If it turns out that the bidding contractor can’t do the job at the price guaranteed, those resources are going to cost the customer.

That’s where these bonds step in and offer protection. It’ll also protect the customer if a contractor backs out of a project after bidding.


The performance bond will be the second stage of the bonding process or the second type of bond that you can deal with.

As you’ve likely figured out by now, the one is a guarantee that ensures the customer a contractor will perform specific tasks to requirements.

It ensures that a contractor not only uses the specified materials, but it ensures that the contractor does a quality job promptly.


Payment bonds will be the last type of bond that you’ll likely encounter in the construction phase.

This one can apply during and after the project, as it ensures that everyone gets properly paid. It ensures that all the materials for the job are paid for as well as the subcontractors.

The types of bonds were specifically designed to protect the project owner from having to pay out of pocket to have a subcontractor finish a job or paying to have the rest of the materials funded.