Common Types of Construction Bonds

Construction Bonds

Finding the right construction bonds can be tricky if you’re new to the business, but there are really only a few types to worry about for most jobs. Much of the diversity in the market comes from bond providers catering to niche needs larger developers might have on big projects. Getting started is as easy as understanding a small group of four or five bond options.

License and Performance Bonds

The two most basic types of construction bonds are license bonds and performance bonds. License bonds protect the project owner in the event your license is lapsed or there are similar credentialing issues with any subcontractors you hire. Performance bonds protect the customer if your performance causes them to miss milestones or otherwise incur damages due to setbacks that your business is liable for. Within the realm of performance bonds, there are also individual payment and supply bond options designed to protect the customer and your business in the event of disruptions to the raw material supply line or to your ability to pay subcontractors.

Maintenance Bonds

Maintenance bonds are also quite common, and they cover the ongoing maintenance of properties after construction is completed, providing for expenses related to design defects or other issues that cause maintenance costs to exceed the projections in the approved design for the project. This protects you and the client in the event of defects to the design or construction that aren’t immediately apparent at the conclusion of the project.