Why Does a Contractor Require a Surety Bond?

There are many risks associated with a contracting business, and a surety bond is a solution for contracting firms to avoid the risk of loss in case a party breaches the contract. 

A construction project owner should require a contractor to provide a bidbond. The surety company agrees to pay for any financial damages if the principal fails to enter into a contract at a price offered in their bid. The first people to suffer damages are the general contractor, subcontractors, and material suppliers. However, if a contractor has difficulty securing a surety bond, it should consider working with an agent specializing in obtaining these bonds for contractors.

Discussed below are the importance of including surety bonds in your contract. 

  • A Surety Bond is a Promise

The organization that needs the bond is known as the obligee. Governmental organizations that supervise industries and lessen the chance of financial loss are typically obligated, and the security provider who supports the bond is known as the surety. If the principal cannot complete the work, the surety offers a line of credit.

They can be cash or surety, depending on what the parties agree upon and what works best for you and your business. 

  • It is an Agreement to Pay

The surety company agrees to pay for any financial damages if the principal fails to enter into a contract. Having this bond will ensure that in case of non-fulfillment of the terms of the agreement, the company is liable and has to pay a certain sum.

In order to avoid having their money withheld by the surety company, contractors must be able to prove that they have taken all necessary steps toward the completion of their project on time and within budget.

This document, which is given along with the bidbond at the tender stage, is the assurance company’s assurance that it will supply the necessary construction bonds if the principle is low and awarded.

If you’re having trouble securing a surety bond, consider working with an agent specializing in securing surety bonds for contractors. Surety bond agents can help you find the proper surety bond for your project and secure it quickly.

  • An Essential Protection for a Construction Project Owner

A surety bond is a form of a performance bond. Bid bonds assure that a contractor who submits a bid will sign a contract if approved. The contractor’s compliance with the conditions of the building contract is ensured by these bonds.

An insurance company or surety generally issues a surety bond, and it can be used to protect all parties involved in the construction process. Contractual bonds and commercial bonds are the two main types of surety bonds. A particular contract is ensured by contract bonds and bid contracts, supply bonds, maintenance securities, and subdivision bonds are some of its examples. Commercial bonds promise per the bond form’s conditions.


With so many reasons to require a surety bond on your construction project, it is time for you to consider using one. Surety bonds are essential, especially when working with numerous clients with a large amount of money. Contact a reputed provider online if you need help finding the best option.

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