Surety FAQ Series Part 5: What is a Contract Bond?

contract bond

In an effort to help consumers better understand the niche surety industry, Insider contributors have created a seven-part series answering the most popular questions about surety. Check out the first, second, third and fourth installments if you need a more general understanding of surety bonds. Read on to get a greater grasp on contract bonds.

What is a contract bond?

Contract bonds are required during different stages of a contracting project to ensure all of the project’s contracts are honored.

Contract surety bonds describe a category of several bonds required during contracting projects. Their purpose is to guarantee that the contractor adheres to the provisions of his contract and completes the project as promised. There are four main types of contract bonds:

  • Performance bonds: before construction begins, the contractor must provide a performance bond ensuring that the project will be completed as stated in the contract
  • Payment bonds: ensure all subcontractors and material suppliers are paid according to their contracts
  • Bid bonds: ensure that the contractor who submits the winning bid will honor that bid and will not increase the bid after entering the contract
  • Maintenance bonds: after a project is complete, some project owners might choose to provide a maintenance bond which protect against defects for a certain period of time after project completion

The main purpose of contract bonds is to ensure contracting work is done in accordance with all applicable laws. They also protect the contractor’s clients from suffering any financial loss if the contractor is unable to fulfill his contract.

Contract bonds are also sometimes known as construction bonds. Don’t confuse contract bonds with contractor license bonds, which we talked about in Part 3 of this series.

Bond requirements usually differ by state, county, and even city, so check your local laws thoroughly before purchasing a bond. The experts at can help answer your bonding questions and make the bonding process as easy as possible.

Stay tuned for our next installment, Surety FAQ Series Part 6: Why Do I Need a Surety Bond?

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About the Author

Melanie Baravik
Melanie is a senior at the University of Missouri - Columbia studying English with an emphasis in creative writing. She is a member of the marketing department and outreach team for, a leading provider of online bonding for clients nationwide.