Construction & Bonds Insurance

There are 3 main construction bonds. The Bid Bond, the Labour and Materials Payment Bond and the Performance Bond.

All bonds are essentially financial guarantees provided by Surety Companies. While the financial guarantees contained in the bonds are provided by the Surety Company, the business/construction company to whom the bonds are issued provides financial guarantees to the Surety promising to re-pay the Surety should the bonds get called upon by the owner of a project and the Surety is required to make payment on the bond.

The Bid Bond

The Bid Bond, usually in an amount of 10% of any given project bid Provides a financial guarantee that the bidder will not withdraw their bid and if they do withdraw forcing the project owner to re-tender, the bid bond will usually reimburse the project owner for his added costs up to 10% of the original bid.

The Labour and Materials Payment Bond

The Labour and Materials Payment Bond and the Performance Bond are usually requested in amount of 50% of the given project bid price.

The Labour and Material Payment Bond essentially guarantees the faithful payment of all labour, materials and supplies that go into the makeup of the project.

The Performance Bond

The Performance Bond essentially guarantees that the project will be undertaken and completed in accordance with the specifications of the project and will be completed within the time allotted for the project.


The Surety Companies are owned and operated by the insurance companies. The Surety Company will need a contractor’s questionnaire, 3 years of review engagement or audited financial statements, a reference letter from the contractors bank, resumes' of key personnel, personal financial net worth statements of the shareholders of the business and current work on hand schedule.

The above information will allow the Surety company to determine whether the business has the capital to undertake construction projects, the capacity or experience to actually do the work and the character strength to stay on the project until it has been completed.

Following the Surety Company's review a determination will be made on the size of the project and total work on hand the contractor is able to manage and file limits will be set and financial guarantees are taken from the shareholders of the business.