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In the most general terms, surety bonds are a promise to pay one party a certain amount if a second party fails to fulfill an obligation or terms of a contract. While surety bonds are used in several different types of industries, including catering, cleaning, and mortgage industries, they are most common in construction. Within the construction industry, there are many types of surety bonds, including contract bonds such as bid bonds, payment bonds, and performance bonds.
A contractor’s license bond, or contractor’s bond, is a promise not to commit any violation of contractor license law that is grounds for disciplinary action against the license. If the contractor does not comply with the conditions of the law, a claim can be filed against the surety company that has issued the surety bond. Sometimes called commercial surety bonds, contractor’s bonds don’t guarantee any specific contracts like a contract bond does.
Bid bonds are submitted by contractors along with bids for a specific project to provide the owner of the project with some financial assurance that should the contractor be awarded the construction project they will enter into the contract with the owner and also post performance and payment surety bonds.
Once a contractor is awarded a construction project, they submit a performance bond to the owner of the project which guarantees contract performance by the contractor according to the contract specifications, terms and conditions. The surety bond’s company backs this guarantee up to the financial limit of the bond.
Along with a performance bond, a contractor generally submits a payment bond to the owner of the project. A payment bond guarantees that upon completion of a building project a contractor will pay certain bills for labor and materials which are associated with a building contract.
Surety bonds that guarantee a specific contract within the construction sector are sometimes referred to as construction bonds. A construction surety bond can be any kind of contract bond such as a bid bond, payment bond, performance bond, or completion bond.
Get Your Surety Bonds Now!
CSIA is the West Coast’s leading full-service source for surety bonds, including contractor’s license bonds, bid bonds, performance bids, payment bids, and even surety bonds for bad credit applicants. CSIA staff has a thorough understanding of complicated contractor’s license laws, and has an excellent track record for protecting contractors from loss of license by payment of invalid claims.
If you have any a contractor’s license bond or surety bond questions, please do not hesitate to call us toll free at 1-800-675-2000.