Isn’t a bond just like insurance?

No, a bond is not insurance. If the principal of the bond defaults in its obligations to the obligee the bonding company will pay the damages to the obligee; however, the principal must then reimburse the bonding company for damages paid.

What is a commercial contract surety bond?

A surety bond is an agreement under which the surety (underwriting company providing the bond) guarantees to the obligee (owner, construction manager, etc.) the performance of the contract according to its terms and conditions by the principal (construction manager, general contractor, subcontractor, etc).

What are the common types of commercial contract surety bonds:

Bid bond: Provides protection to the obligee should the principal (successful bidder) not enter into the contract and does not provide the required surety bonds.

Maintenance bond: A Maintenance bond for commercial contractors guarantees their quality of work during the duration of the contract.

Performance bond: The bond guarantees to the obligee that the principal will perform according to the contract terms and conditions.

Payment bond: The bond guarantees to the obligee that the principal will pay their subcontractors, labor and material costs associated with the contract for which the bond is required.

Supply bond: A guarantee that the principal will furnish the equipment, supplies or materials to the obligee (usually a public body) as required by the contract.

Other common commercial bonds:

License and Permit: Permission from a governmental body to perform an activity; the bond indemnifies them for loss or damage resulting from failure of the licensee or permittee to comply with the ordinance, laws or regulations relating to the business in which they operate.

Notary Public: The bond protects the public and guarantees the notary will faithfully perform the duties of their office as prescribed by law.