Surety bonds for contractors
Bonds are not insurance and they do not work like it. A surety pays the claimant and then recovers from you, which makes bonding capacity a question about your finances rather than your loss history.
The distinction matters because it changes everything about how a bond is obtained and priced. With insurance, you pay a premium, the insurer pools risk across many policyholders, and a covered loss is paid without coming back to you. With a bond, the surety promises a third party that you will perform or pay, and if it has to pay out, it expects to recover that money from you.
This is why a surety asks for financial statements, working capital and a personal indemnity, and why it does not ask much about your claims history. It is underwriting your ability to reimburse it, not the probability of a loss.
A contractor can be entirely capable of doing a job and still be unable to bond it. Sureties set a capacity based on demonstrated financial strength, completed work of similar size, and working capital. A single job larger than anything you have previously bonded is the classic refusal, and it usually arrives after you have won the bid.
The way to build capacity is to complete bonded work successfully and to keep the financial statements clean, which means the conversation with a surety belongs well before the bid for the job you actually want. Retroactive capacity is not a thing.
Eight coverages cover almost everything a construction business faces. They do different jobs, and buying one does not cover the others.
Third party injury and property damage caused by your operations.
Medical care and lost wages for your own injured employees.
Vehicles used in the business, including owned, hired and non owned.
Your tools and equipment against theft, damage and loss.
The project under construction, plus materials on site.
A guarantee of performance or payment, not a transfer of risk.
Extra limits above your underlying policies once those are used up.
Claims from design work and advice, which general liability excludes.
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Tell us your trade, payroll and the states you work in. A licensed specialist will come back with real numbers.
