What is a Contractor Bond vs Contractor Insurance?

A contractor surety bond is a type of insurance but it's actually an insurance policy you purchase for the protection of your customers.

"Regular" insurance you're more familiar with is purchased by you for your protection.

Let's break this down.

Contractor Surety Bonds

I'll keep this high level because there are a lot of different types of contractor surety bonds like:

• License bonds
• Bid and Performance Bonds
• Retainage bonds

Despite these different types, they all have the same purpose... to prevent contractor fraud.

When a state, county, or city licensing agency issues contractors licenses, they need some way to hold them accountable to following contracting laws.

There's no doubt these government agencies would love to monitor every job you do, but that is not reasonable.

So they make every contractor purchase a surety bond. If the contractor commits fraud, the customer can make a complaint to the state, county, or city along with a claim against the surety bond for financial compensation.

If the claim is validated the surety bond pays out and the contractor has to pay back the insurance company that underwrote their surety bond the amount of the claim.

Construction Project Surety Bonds

Contractor bonds needed for specific construction projects are exactly the same. These are referred to as construction surety bonds. Yet, it's the project owner that requires the bond or bonds.

Other Types of Contractor Insurance

The most common type of insurance needed to get licensed is liability insurance.

This form of insurance is used to protect your business in the event of an injury to a third party or property damage while on the job site.

In many states this is a legal requirement. But even if it's not, the risk to your business is very real so it's something you should have regardless.

There are many other types of insurance you will likely have in your business...

• Builders risk insurance
• Vehicle and equipment insurance
• Workers compensation insurance

So to recap...

The surety bond is one small but very important requirement for running a successful contracting business.

The good news with the surety bond is the amount you're required to get is typically set in stone. It's not a matter of judgement... it's a matter of getting the lowest possible price.

That's what we help you do. Click here and request a price quote. You can tell us about your situation and the type of bond you need and we can help you from there. Or you can give us a call at 1-800-608-9950 and speak directly to a real human bond specialist.