A legally binding guarantee involving a third party (the surety) that a contractor will meet their obligations.
A surety bond is a three-party agreement among a principal (contractor), an obligee (owner or government), and a surety (bonding company) that guarantees the principal will fulfill a specific obligation. Unlike insurance, a surety bond is not intended to absorb losses but to guarantee performance; the surety expects to be repaid by the principal for any claims paid. Surety bonds used in construction include bid bonds, performance bonds, payment bonds, and license bonds.
A county requires a surety bond package—bid bond, performance bond, and payment bond—for all public construction projects over $500,000.
Get AI-powered bid alerts, automated form filling, and proposal drafting.
Start Free Trial