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  • Writer's pictureChristian Collins

What to know about Construction Bonds

Updated: Jan 4, 2023

Almost every construction project executed today requires an assurance of performance. The Construction Bonds ensure that the contractors are bound to deliver performance as assured under the bond. The bond protects the owner from lack of performance, contractor default, warranty issues, and more.

Who All are Parties to the Bond?

  • Principal – Is the contractor who requests the Construction Bond before they take up a project. Subcontractors can also secure these bonds for working under the primary contractor for delivering essential labor, equipment, and supplies to them.

  • Surety Company – They are the ones who issue the bond. They can be a bank or a private group that is financially strong enough to provide appropriate coverage. They pay the obligee if the contractor delays (or defaults) the project.

  • Obligee – They are the project owner who gets assurance under the bond that their project will be completed under the contract terms. If there is a delay or default, the surety company will compensate for their loss.

How Contractors Can Benefit from Construction Bonds

  • They represent your financial standing: These bonds are issued according to your financial standing and past performances. With every bond, you will be able to build more credibility.

  • They help you land more projects: With strong credibility, you will have the opportunity to attract more contracts. You can even pick the best ones among those according to your preference.

  • They help keep disputes at bay: If there is a dispute after the project begins, the bonds keep you secured from taking any financial hit.


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