“Construction Bond” is another way of saying “Contract Bond”. Contract Bonds are not a specific type of surety bond, but instead are considered a sub-category, containing a number of different types of contract bonds, such as “Bid Bonds”, “Performance Bonds”, and among others “Subdivision Bonds”.
More on Contract Bonds: Contract bonds are designed to guarantee the performance of obligations under a contract. In other words, they guarantee the obligee (in most circumstances the project owner) that the principal (the contractor) will perform according to the terms of a written contract. Construction contracts constitute the majority of this surety bond sub-category. Contract bonds protect a project owner by guaranteeing a contractor’s performance and payment for labor and materials. Because the contractor must meet the bonding company’s pre-qualification standards, construction lenders are also indirectly assured that the project will proceed in accordance with the terms of the contract.
When are Construction Bonds (Contract Bonds) required? Some jurisdictions require contractors to post a bond before they can begin working. If it is not required, project owners can also require a contract bond from the contractor when negotiating the construction contract.
Ready to Get Bonded? Visit our Contract Bond Application Center for more information.
Current Market: At the turn of the century, bonding companies throughout the industry utilized very liberal underwriting methods for most contract bonds, which resulted in losses for many companies. Throughout this current decade, however, bonding companies have applied more scrutiny to underwriting practices, over time adopting more of a traditional, conservative stance.
About Our Programs: Through strong industry connections, our agency is able to help contractors of all sizes, find the right bonding company to meet their needs. We also have access to exclusive programs that can help you qualify for bonds that many other agencies are unable to place. For more information, go to our Contract Bonds page and click on the link for the specific bond you are interested in.