Contractor, Bid & Performance Bond Questions

Contact Us: (877) 328-1230

What is a Bid Bond?

A Bid Bond acts as a guarantee that the Contractor (or Principal) bidding on a contract will honor the bid commitment and secure the required performance and payment. Typically the Bid Bond is 5% or 10% of the overall contract amount, depending on which state or municipality is the Obligee.

A Bid Bond ensures that the contracting client (or Obligee) will still receive the lowest price even if the lowest bidding company withdraws without entering into the contract. If the Principal does not honor their bid and tries to withdraw after being awarded the contract, they will be obligated to pay the Obligee the difference between the winning bid and next lowest bid, up to the amount of the Bid Bond.

Apply for a Bid Bond Here

What is a Performance Bond?

A performance bond guarantees that the contractor (the Principal) will perform the job according to the terms and specifications as set forth in the contract with the individual or entity that required the bond (the Obligee, usually the federal government, state, municipality, private developer or other contractor). If the Principal does not complete the project or constructs it defectively, the Surety may need to step in and fulfill the obligation if the Principal is not able to do so.

Apply for a Performance Bond Here

What is a Payment Bond?

A Payment Bond guarantees that the contractor (the Principal) will make payments according to the contract terms and conditions to certain individuals and entities such as labor, material suppliers and subcontractors. Payment bonds are typically required before being awarded a contract.

Apply for a Payment Bond Here

What is a Maintenance Bond?

A Maintenance Bond guarantees that the contractor (the Principal) will repair and/or replace defective materials, workmanship and/or design for a specified period of time.

Apply for a Maintenance Bond Here

What is an Indemnity Agreement, General Indemnity Agreement or Agreement of Indemnity?

An Indemnity Agreement is an Agreement that the Principal will reimburse the Surety for any and all costs and expenses that the Surety incurred in the unfortunate event of a claim or loss. For example, these costs and expenses could include any payments to subcontractors and suppliers for unpaid balances, as well as consulting fees, engineering fees, legal fees and other expenses the Surety incurred to investigate and/or resolve the claim. The Indemnity Agreement typically applies to both your business and personal assets.

Surety Bonds are not a typical form of insurance. If there is a claim or loss, the Principal (the person or entity who bears the primary responsibility for the bonded obligation), not the Surety, bears the risk associated with the obligation.

Why does my Spouse need to sign the Indemnity Agreement? He/she does not own, nor has any involvement in the business.

Sureties often require that a spouse personally guarantees your surety bond. Because most personal assets of a married couple are shared jointly, the Surety will often require that the Principal’s spouse sign the Indemnity Agreement to ensure that all personal assets are available in the unfortunate event of a claim.

We recommend that the Principal carefully review the Indemnity Agreement with a qualified attorney before entering into a Surety Bond contract.

What is a Consent of Surety?

The consent of surety obligates the Surety into issuing a Performance Bond for the required amount of the Performance and Payment Bond as required in the contract specifications. These are typically for 100% of the contract value.


(877) 328-1230 



New Jersey

80 Main Street, Suite 330

West Orange, New Jersey 07052

(973) 731-7650

New York

35 Pinelawn Road, Suite 111E

Melville, New York 11747

(631) 343-4304

Thanks for submitting!