A Surety Bond is a three party agreement between the PRINCIPAL(contractor or business performing the work) the OBLIGEE (party to whom the obligation is made, i.e. owner) and the SURETY (Insurance Company who makes an obligation on behalf of the Principal to the Obligee).

BID BOND:
When bonding is required on Government or Private Contracts the bid bond is issued first by the Surety company to be submitted along with Principals bid. If the Principal is low bid and an award is made, the Bid Bond guarantees that the Principal will enter into the contract. The bid bond also guarantees that Principal will post the required Performance and Payment Bonds. Bid bonds are usually required for between 10% and 20% of the bid amount.

PERFORMANCE BOND:
If the Principal is low bid and a contract is awarded a Performance Bond is required. The Performance Bond guarantees that the Principal (Contractor) will complete the contract in accordance with the terms and conditions of the contract and in accordance with the plans and specifications.

PAYMENT BOND:
Payment Bonds are issued as a companion to the performance bond and guarantees that Laborers, Sub Contractors and Material Suppliers of the Principal (Contractor) will be paid. The purpose of the Payment Bond is to eliminate the filing of liens by unpaid supplies or subcontractors, that would encumber title to the owners project. If required, a Payment Bond is issued along with the Performance Bond at no additional charge.

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