If you are in the contracting business, you will find that many business insurance companies generally also offer a variety of bonds. Most of these bonds are designed to protect a contractor, builder, or developer against substandard work that does not comply with local building codes. Several institutional lending companies, insurance companies, and/or commercial banks, on average, require contractors to secure bonds for large jobs. These bonds are known as contractor’s license bonds, performance or contract bonds, surety bonds, street obstruction bonds, and license & permit bonds.
A contractor’s license bond of at least $10,000 or more are generally required of contractors. Performance or contract bonds refer to the guaranteed satisfactory completion of a project by a contractor. Surety bonds represent the agreement providing for monetary compensation in the event of a failure to perform specified acts within a stated time frame. The surety company is thus responsible for fulfillment of a contractor if the contractor defaults.
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