During your search for a construction company for a building project you will soon be kicking off, have you been hearing a lot about surety bonds?

Are surety bonds something you have not heard of before? Are you unsure why construction companies use surety bonds?

Here is what you need to know about the need for surety bonds during a construction job, as well as why you should make sure the company you hire already has one for your project.

Why do construction companies often use surety bonds? — Construction companies will often make sure they have a surety bond for any new building project they take on.

This is usually done as this type of bond will make sure their client is covered for completion of the project in case the construction company has problems. These problems can be due to bankruptcy, being unable to keep the job under budget or not being able to complete the job on time.

A construction company will also pay for a surety bond to ensure specific sub-contractors will work with them, as the bond also covers payment to these sub-contractors should the construction company have problems paying them.

Who provides a surety bond? — A surety bond is issued by insurance companies so, in effect, they are nothing more than a different kind of insurance policy.

What happens if a construction company cannot finish a job? — Tens of thousands of construction companies go bankrupt every year across the United States. When they do, the jobs they are currently working on are usually not able to be finished.

At this point it is up to the insurance companies to step in as part of the surety bond agreement the construction company paid for.

When they do, they will ensure that the building project is completed in the way the original contract called for, even if this means calling in a second construction company to finish the job.

Who pays for a surety bond? — The construction company pays for a surety bond. It does so as a way to entice clients, as a client is far more likely to hire that particular construction firm if they are able to offer a surety bond as part of the deal.

In many cases, the person or people who own the construction company will put up something of value that they own with the insurance company — a house, an expensive car, a highly valued piece of land or property — so that they can indemnify the construction company.

Peace of mind when hiring a company with a surety bond — For you as a potential client, there is so much peace of mind that comes from hiring a construction company that offers a surety bond it pays to do so.


After all, if anything does go wrong at the construction company or they go bankrupt while working on your building project, you will be secure in the fact that your project will be finished.