A construction bond is a guarantee by a third party (insurance company or surety) to finalize construction in accordance with the terms of the contract in the event the contractor fails to perform according to the terms of the contract. The following outlines common types of Construction Bonds:
Bid Bond – A bid bond shows proof of guarantee to the project owner that you will be able to comply with the bid contract and that you can accomplish the job as laid out in the contract. Providing this to the project owner states that you are capable of taking on the project.
Payment Bond – A bond that is provided to show that a contractor will be able to pay his subcontractors, and material cost.
Performance Bond – A bond that is issued by a bank or insurance company to guarantee completion of a project by a contractor.
Maintenance Bond – A bond protecting against problems that arise for a certain amount of time after completion of the project.The surety will remedy the problem or pay financial compensation.