Where a Bid Bond ensures the “good faith” of a Contractor’s work-bid, a Performance Bond ensures monetary compensation to the client in the event the Contractor fails to finish the project according to the specifications laid out by the contract (most often due to the default or bankruptcy of the contractor).

Contractors – Bid Bonds provide a guarantee to the Client, they do not release your business from the bid obligation. The contractor will be responsible to repay the Bank or Insurance Carrier any payments made to the Client.

I recently came across a great example in the Insurance Journal of the Business Risk Exclusion included in almost every contractor insurance policy. Often I receive facial expressions of disbelief when I explain this exclusion to new business clients.

Contract (or Construction) Bonds can drive a Contractor crazy, especially if that contractor is dealing with a municipality. However, despite most contractors familiarity with construction bonds,