Contract surety

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13 sources. Every citation number above resolves to a record below. Nothing here sits behind an account.

1. [1]

   13 CFR 115.10 - Definitions (SBA Surety Bond Guarantee Program)(opens the original record on Cornell Legal Information Institute (reproducing the Code of Federal Regulations))

   Cornell Legal Information Institute (reproducing the Code of Federal Regulations)Primary lawPrimaryJurisdiction USThird-party reproductionLast checked August 31, 2026Updates: Amended through the Federal Register as SBA revises part 115ID cfr-13-115-10-sba-definitions

   What this source supports (11)

   • These are definitions in 13 CFR part 115, the SBA Surety Bond Guarantee Program; they define the terms for that program.
   • Principal means, in the case of a Bid Bond, the Person bidding for the award of a Contract, and in the case of a Final Bond or an Ancillary Bond, the Person primarily liable to complete the Contract or to make Contract-related payments.
   • Obligee means, in the case of a Bid Bond, the Person requesting bids for the performance of a Contract, and in the case of a Final Bond, the Person who has contracted with a Principal for the completion of the Contract and to whom the primary obligation of the Surety runs in the event of a breach by the Principal.
   • Surety means a company which, under the terms of a Bid Bond, agrees to pay a sum of money to the Obligee if the Principal breaches the conditions of the bond; under the terms of a Performance Bond, agrees to pay a sum of money or to incur the cost of fulfilling the terms of a Contract; and under the terms of a Payment or an Ancillary Bond, agrees to make payment to all who have a right of action against such bond.
   • The term Surety includes an agent, independent agent, underwriter, or any other company or individual empowered to act on behalf of the Surety.
   • A Bid Bond is a bond conditioned upon the bidder on a Contract entering into the Contract and furnishing the required Payment and Performance Bonds.
   • A Performance Bond is a bond conditioned upon the completion by the Principal of a Contract in accordance with its terms.
   • A Payment Bond is a bond conditioned upon the payment by the Principal of money to persons who have a right of action against such bond, and a Payment Bond cannot require the Surety to pay an amount which exceeds the claimant's actual loss or damage.
   • A Final Bond means a Performance Bond and/or a Payment Bond.
   • An Ancillary Bond is a bond incidental and essential to the performance of a Contract for which there is a guaranteed Final Bond.
   • No Person other than a Federal department or agency may be named co-Obligee or Obligee on a bond or a rider unless bound by the Contract to the same extent as the original Obligee, and adding co-Obligees may not increase the aggregate liability of the Surety under the bond.

   Re-fetched 2026-08-31 and read the definitions directly. The earlier draft flattened the bond-type branches in the Principal, Obligee, and Surety definitions and attributed a general-liability, property, and workers compensation allocation to this section; the section says nothing about those lines of insurance, and that attribution has been removed. The definitions are scoped to SBA part 115 and are used here only as a clear statement of the three roles and of what each bond type is conditioned on. The official eCFR copy at ecfr.gov redirects to unblock.federalregister.gov and could not be fetched, so the Cornell LII reproduction is used.

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2. [2]

   Surety bonds - Funding Programs(opens the original record on U.S. Small Business Administration)

   U.S. Small Business AdministrationRegulatorPrimaryJurisdiction USLast checked August 31, 2026Updates: Updated by SBA as program parameters change; contract limits are periodically adjustedID sba-surety-bond-guarantee-program

   What this source supports (5)

   • SBA guarantees surety bonds issued by certain surety companies for qualified small businesses.
   • The bond types SBA guarantees include bid bonds, payment bonds, performance bonds, and ancillary bonds.
   • All performance and payment bond guarantees require small businesses to pay SBA a fee of 0.6 percent of the contract price.
   • SBA does not charge a fee for bid bond guarantees.
   • SBA-guaranteed bonds cover contracts up to $9 million for non-federal contracts and up to $14 million for federal contracts.

   Re-fetched 2026-08-31; the four bond categories, the 0.6 percent fee, the no-fee treatment of bid bond guarantees, and the $9 million and $14 million contract limits all appear on the page. A marketing line about bonds helping small businesses win contracts was dropped from this card because it was not re-verified. This is a program landing page and is not used for the three-party structure or the reimbursement duty.

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3. [3]

   40 U.S.C. 3131 - Bonds of contractors of public buildings or works (Miller Act)(opens the original record on Office of the Law Revision Counsel, U.S. House of Representatives (uscode.house.gov))

   Office of the Law Revision Counsel, U.S. House of Representatives (uscode.house.gov)Primary lawPrimaryJurisdiction USLast checked August 31, 2026Updates: Amended by act of Congress; codified in title 40 chapter 31 subchapter IIIID usc-40-3131-miller-act

   What this source supports (8)

   • In this subchapter, the term contractor means a person awarded a contract described in subsection (b).
   • Before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government a performance bond and a payment bond, which become binding when the contract is awarded.
   • The performance bond must be with a surety satisfactory to the officer awarding the contract, and in an amount the officer considers adequate, for the protection of the Government.
   • The payment bond must be with a surety satisfactory to the officer for the protection of all persons supplying labor and material in carrying out the work provided for in the contract.
   • The amount of the payment bond shall equal the total amount payable by the terms of the contract unless the officer awarding the contract determines, in a writing supported by specific findings, that a payment bond in that amount is impractical, in which case the contracting officer shall set the amount; the amount of the payment bond shall not be less than the amount of the performance bond.
   • Every performance bond required under this section specifically shall provide coverage for taxes the Government imposes which are collected, deducted, or withheld from wages the contractor pays in carrying out the contract.
   • A contracting officer may waive the requirement of a performance bond and payment bond for work under a contract that is to be performed in a foreign country if the officer finds that it is impracticable for the contractor to furnish the bonds.
   • This section does not limit the authority of a contracting officer to require a performance bond or other security in addition to those, or in cases other than the cases, specified in subsection (b).

   Re-verified 2026-08-31 on the Office of the Law Revision Counsel site, the official publisher of the United States Code; the $100,000 figure in subsection (b) is confirmed as the current statutory threshold. The source URL was moved from the Cornell LII reproduction to uscode.house.gov in this revision. Two statutory branches that the earlier draft omitted are now on the card: subsection (d), the foreign-country waiver, and subsection (e), which preserves the contracting officer's authority to require bonds or other security beyond and outside subsection (b). An earlier version of this card also misquoted the payment bond rule as a written determination that a lesser amount is adequate; the statute says the awarding officer must determine, in a writing supported by specific findings, that a payment bond in the total-contract-price amount is impractical.

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4. [4]

   FAR 28.102-1 - Performance and payment bonds and alternative payment protections for construction contracts, General(opens the original record on U.S. General Services Administration (Acquisition.gov, Federal Acquisition Regulation))

   U.S. General Services Administration (Acquisition.gov, Federal Acquisition Regulation)RegulatorPrimaryJurisdiction USLast checked August 31, 2026Updates: Updated by Federal Acquisition CircularsID far-28-102-1

   What this source supports (5)

   • FAR 28.102-1(a) states that 40 U.S.C. chapter 31, subchapter III, Bonds, formerly known as the Miller Act, requires performance and payment bonds for any construction contract exceeding $150,000, except that this requirement may be waived, first by the contracting officer for work performed in a foreign country upon a finding that it is impracticable for the contractor to furnish the bonds, and second as otherwise authorized by the Bonds statute or by other law.
   • Pursuant to 40 U.S.C. 3132, for construction contracts greater than $35,000 but not greater than $150,000, the contracting officer shall select two or more of the listed payment protections, giving particular consideration to inclusion of an irrevocable letter of credit as one of the selected alternatives.
   • The payment protections the contracting officer selects from are a payment bond, an irrevocable letter of credit, a tripartite escrow agreement, certificates of deposit, and a deposit of the types of security listed in FAR 28.204-1 and 28.204-2.
   • The contractor shall submit to the Government one of the payment protections selected by the contracting officer.
   • The contractor shall furnish all bonds or alternative payment protection, including any necessary reinsurance agreements, before receiving a notice to proceed with the work or being allowed to start work.

   Re-fetched 2026-08-31 from acquisition.gov, the publisher's own site, and the paragraph (a) and (b)(1) text was read against the part 28 page as well. Three corrections were made in this revision. The waiver clause in paragraph (a), previously dropped for lack of quotable detail, is now carried with both of its branches, because stating the $150,000 requirement without it overstates the rule. The list of payment protections previously stopped at four and omitted the fifth, a deposit of the types of security listed in 28.204-1 and 28.204-2. The bracket wording now follows the FAR, which reads not greater than $150,000. The separate card entry about the 40 U.S.C. 3132 citation was folded into the paragraph (b)(1) entry, where that citation actually appears. The FAR text contains no inflation-adjustment language, so this source is not used for any assertion about thresholds moving.

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5. [5]

   41 U.S.C. 1908 - Inflation adjustment of acquisition-related dollar thresholds(opens the original record on Office of the Law Revision Counsel, U.S. House of Representatives (uscode.house.gov))

   Office of the Law Revision Counsel, U.S. House of Representatives (uscode.house.gov)Primary lawPrimaryJurisdiction USLast checked August 31, 2026Updates: Amended by act of CongressID usc-41-1908-acquisition-thresholds

   What this source supports (5)

   • On October 1 of each year evenly divisible by 5, the Federal Acquisition Regulatory Council shall adjust each acquisition-related dollar threshold provided by law, as described in the section.
   • The adjustment requirement applies to a dollar threshold specified in law as a factor in defining the scope of the applicability of a policy, procedure, requirement, or restriction provided in that law to the procurement of property or services by an executive agency, as the Council determines, except as provided in the exceptions paragraph.
   • The adjustment does not apply to dollar thresholds in sections 3131 through 3134 of title 40, except that any modification of any such dollar threshold made by regulation and in effect on the date of the enactment of that subparagraph shall remain in effect.
   • The adjustment also does not apply to dollar thresholds in chapters 67 and 83 of title 41, in sections 3141 to 3144, 3146, and 3147 of title 40, or to thresholds the United States Trade Representative establishes under title III of the Trade Agreements Act of 1979.
   • Adjustments are calculated on the basis of changes in the Consumer Price Index for all-urban consumers published monthly by the Secretary of Labor.

   Re-verified 2026-08-31 on uscode.house.gov, the official publisher of the United States Code; the source URL was moved there from the Cornell LII reproduction in this revision. Subsections (a), (b) including the exceptions paragraph, and (c) were read there, and the Consumer Price Index basis appears in the section's adjustment provision. Used to explain the relationship between the Miller Act's $100,000 and the FAR's $150,000 instead of presenting them as an unexplained conflict. The card deliberately does not state the enactment date of the title 40 exception because the statutory text refers to it only as the date of the enactment of that subparagraph.

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6. [6]

   31 CFR 223.16 - List of certificate holding companies(opens the original record on Cornell Legal Information Institute (reproducing the Code of Federal Regulations))

   Cornell Legal Information Institute (reproducing the Code of Federal Regulations)RegulatorPrimaryJurisdiction USThird-party reproductionLast checked August 31, 2026Updates: The underlying Circular 570 listing is republished annually as of August 1 and updated between editionsID cfr-31-223-16-treasury-circular-570

   What this source supports (6)

   • A list of certificate holding companies is published annually as of August 1 in Department Circular No. 570, Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies.
   • The Circular carries information as to underwriting limitations, areas in which listed sureties are licensed to transact surety business, and other details.
   • If Treasury takes exceptions to the financial statements or other information pertinent to a company's financial solvency, it must give the company due notice of those exceptions before issuing the Circular.
   • Copies of the Circular are available at the Bureau of the Fiscal Service listing of certified companies or from the Surety Bonds Program upon request.
   • Bonds underwritten by certified companies on the Department Circular No. 570 list may be presented to an agency bond-approving official for acceptance.
   • Selection of a particular qualified company from among all companies holding certificates of authority is discretionary with the principal required to furnish the bond, but acceptance of a bond by an agency bond-approving official is subject to 31 CFR 223.17.

   Re-fetched 2026-08-31 and read the full section verbatim. The regulation says underwriting limitations without characterizing them as per-bond, so the per-bond wording used in the earlier draft has been removed.

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7. [7]

   California Civil Code section 2847 - Reimbursement of surety by principal(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

   California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked August 31, 2026Updates: Enacted 1872; amended only by act of the LegislatureID ca-civ-code-2847-surety-reimbursement

   What this source supports (3)

   • If a surety satisfies the principal obligation, or any part thereof, whether with or without legal proceedings, the principal is bound to reimburse what the surety has disbursed, including necessary costs and expenses.
   • The surety has no claim for reimbursement against other persons, though they may have been benefited by its act, except as prescribed by the next section.
   • The section carries the notation Enacted 1872.

   Re-fetched 2026-08-31; the full text is short and was read verbatim. An inference about the reimbursement duty being statutory rather than merely contractual was removed from the claims array. The right is conditioned on the surety having satisfied the principal obligation and is expressly subject to the next section (Civil Code 2848). Published: 1872

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8. [8]

   California Insurance Code section 105 - Surety insurance(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

   California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked August 31, 2026Updates: Amended only by act of the LegislatureID ca-ins-code-105-surety-insurance

   What this source supports (3)

   • Surety insurance includes the guaranteeing of behavior of persons and the guaranteeing of performance of contracts, including executing or guaranteeing bonds and undertakings required or permitted in all actions or proceedings or by law allowed, other than insurance policies and other than for payments secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate.
   • Surety insurance also includes insurance against loss resulting from the forgery or alteration of any instrument or of any signature on it.
   • No insurance may be written as surety insurance if it falls within the definition of financial guaranty insurance as set forth in Section 12100.

   Re-fetched 2026-08-31; subdivisions (a) through (d) read verbatim. This is a definitional and classification provision. It does not license or regulate anyone, so it is not used to support any licensing statement, and an inference about surety being a regulated class was removed from the claims array. It says nothing about bail bonds.

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9. [9]

   California Insurance Code section 700 - Certificate of authority required to transact insurance(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

   California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked August 31, 2026Updates: Amended only by act of the LegislatureID ca-ins-code-700-certificate-of-authority

   What this source supports (6)

   • A person shall not transact any class of insurance business in this state without first being admitted for that class.
   • Admission is secured by procuring a certificate of authority from the Insurance Commissioner, except for the State Compensation Insurance Fund as authorized by the sections named in the statute.
   • The certificate shall not be granted until the applicant conforms to the requirements of the Insurance Code and of the laws of this state prerequisite to its issue.
   • After the certificate is issued, the holder must continue to comply with the requirements as to its business set forth in the Insurance Code and other California law.
   • The Commissioner must either issue or deny an application for a certificate of authority within 180 calendar days after the date of the application.
   • The section carries the notation Amended by Stats. 2011, Ch. 15, Sec. 205 (AB 109), effective April 4, 2011, operative October 1, 2011.

   Fetched 2026-08-31 and read verbatim. Added in this revision to support the admission and certificate-of-authority point that Insurance Code section 105 does not support. Section 700 speaks to any class of insurance business generally; it is used here together with section 105, which is what places surety in a defined class. Effective: 2011-04-04

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10. [10]

    California Business and Professions Code section 7071.6 - Contractor's bond(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

    California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked August 31, 2026Updates: Amended by act of the LegislatureID ca-bpc-7071-6-contractor-bond

    What this source supports (6)

    • The board shall require as a condition precedent to the issuance, reinstatement, reactivation, renewal, or continued maintenance of a license, that the applicant or licensee file or have on file a contractor's bond in the sum of twenty-five thousand dollars ($25,000).
    • Excluding the claims brought by the beneficiaries specified in subdivision (a) of Section 7071.5, the aggregate liability of a surety on claims brought against a bond required by this section shall not exceed the sum of seven thousand five hundred dollars ($7,500).
    • The bond proceeds in excess of seven thousand five hundred dollars ($7,500) shall be reserved exclusively for the claims of the beneficiaries specified in subdivision (a) of Section 7071.5.
    • A bond shall not be required of a holder of a license that has been inactivated on the official records of the board during the period the license is inactive.
    • Notwithstanding any other law, as a condition precedent to licensure, the board may require an applicant to post a contractor's bond in twice the amount required pursuant to subdivision (a) until the time that the license is renewed, where the applicant has either been convicted of a violation of Section 7028 or has been cited pursuant to Section 7028.7, where any such citation has been reduced to a final order of the registrar, and where the violation or the basis for the citation constituted a substantial injury to the public.
    • The section carries the notation Repealed and added by Stats. 2021, Ch. 367, Sec. 17 (SB 607), effective January 1, 2022, operative January 1, 2023.

    Re-verified 2026-08-31 against the California Legislative Counsel's own text; subdivisions (a) through (d) and the legislative history were read verbatim, and the $25,000 figure in subdivision (a) is confirmed as the current amount. publishedDate reflects the chaptering of SB 607 (Stats. 2021, Ch. 367); effectiveDate is the January 1, 2022 effective date, with a January 1, 2023 operative date. Two omissions were repaired in this revision. The earlier fetch returned only the first sentence of subdivision (b), so the card was silent on where proceeds above the $7,500 cap go; the second sentence, reserving them exclusively for the section 7071.5(a) beneficiaries, is now carried, because the cap alone reads as though the rest of the bond is unavailable to anyone. Subdivision (d), which lets the board require a bond in twice the subdivision (a) amount on the three stated conditions, was missing entirely and has been added. An inference about the bond being imposed by statute rather than by contract remains out of the claims array. Published: 2021-10-08 Effective: 2022-01-01

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11. [11]

    Fast Facts: A Guide to Contractor License Bonds (Rev. 12/22)(opens the original record on California Contractors State License Board (CSLB), Department of Consumer Affairs)

    California Contractors State License Board (CSLB), Department of Consumer AffairsRegulatorPrimaryJurisdiction CALast checked August 31, 2026Updates: Revised periodically by CSLB; the fetched edition is marked Rev. 12/22ID cslb-license-bonds-fast-facts

    What this source supports (11)

    • To get a California contractor license, contractors must post a surety bond or cashier's check with CSLB.
    • The bond or cashier's check is filed for the benefit of consumers who may be damaged because of defective construction or other violations of contractors' state license law, and for employees who have not been paid wages they are owed.
    • Contractors commonly use a surety bond, referred to as a contractor license bond, where a surety company promises the State of California that it will pay damages if the contractor violates contractors' state license law.
    • The current amount of the contractor license bond is $25,000; the bond amount is not per job, it is the amount available for all the jobs a contractor takes on during the life of the bond.
    • Once the bond has been depleted, a contractor must purchase a new one for the license to remain in effect.
    • Those who can make a claim against a contractor bond include any homeowner who contracts for home improvements or for construction of a single-family dwelling damaged because of a violation of contractors' state license law by the licensee; someone damaged as a result of a willful and deliberate violation of that law or by fraud committed by a licensee in the execution or performance of a construction contract; any employee of the licensee damaged by failure to pay wages; and any person or entity damaged as a result of the licensee's failure to pay fringe benefits for eligible employees.
    • To file a claim against a bond, a consumer should contact the contractor's surety company and include a detailed written description of the problem, a copy of the contract, and all other pertinent documents and information.
    • The guide states that a consumer who is not satisfied with the response of the surety company may take the contractor to small claims court for amounts up to $10,000, and that claims above $10,000 must be filed in a superior court.
    • CSLB may require a separate bond, referred to as a disciplinary bond, for contractors who have been disciplined, and some license qualifiers, including responsible managing employees, are required to have a $25,000 bond on file with CSLB.
    • The surety company will investigate any claim filed against the bond and CSLB will investigate any complaint filed against the license, and CSLB and the surety company will independently resolve the issues under their respective jurisdictions.
    • The document carries the footer Rev. 12/22.

    Downloaded 2026-08-31 and extracted with pdftotext, then read in full. publishedDate is month-only because the document states only Rev. 12/22; the earlier 2022-12-01 value invented a day. The guide's $10,000 small claims figure is quoted here as the guide's own wording and is flagged in the entry as superseded by Code of Civil Procedure section 116.221. The guide does not say the bond is insurance for the contractor, does not describe any reimbursement duty, and does not say CSLB declines to adjudicate bond claims. Published: 2022-12

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12. [12]

    California Code of Civil Procedure section 116.221 - Small claims jurisdiction, natural persons(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

    California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked August 31, 2026Updates: Amended by act of the Legislature; the limit has been raised by statute in the pastID ccp-116-221-small-claims-limit

    What this source supports (2)

    • In addition to the jurisdiction conferred by Section 116.220, the small claims court has jurisdiction in an action brought by a natural person if the amount of the demand does not exceed twelve thousand five hundred dollars ($12,500), except as otherwise prohibited by subdivision (c) of Section 116.220 or subdivision (a) of Section 116.231.
    • The section carries the notation Amended by Stats. 2023, Ch. 861, Sec. 6 (SB 71), effective January 1, 2024.

    Fetched 2026-08-31 and read verbatim. Added in this revision so the stale $10,000 figure in the CSLB Rev. 12/22 guide is not repeated as current California procedure. The section speaks to actions brought by a natural person; it does not set the limit for other claimants. Published: 2023-10-11 Effective: 2024-01-01

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13. [13]

    Answers to 32 Questions Public and Private Owners Ask About Contract Bonding(opens the original record on National Association of Surety Bond Producers (NASBP), SuretyLearn.org)

    National Association of Surety Bond Producers (NASBP), SuretyLearn.orgSecondarySecondaryJurisdiction USLast checked August 31, 2026Updates: Periodically revised by NASBP; the fetched file is dated 8-18 in its filenameID nasbp-32-questions-contract-bonding

    What this source supports (15)

    • A surety bond is a promise to be liable for the debt, default, or failure of another, and is a three-party contract by which one party, the surety, guarantees the performance of a second party, the principal, to a third party, the obligee.
    • The surety is an insurance company licensed by a state department of insurance to provide surety bonds to guarantee the performance of a principal.
    • The obligee is the entity with whom the principal has a contract and to whom the bond is given; in construction this is the project owner or the prime contractor.
    • If the owner is the bond obligee, then the prime contractor is the principal; if the prime contractor is the obligee, then the subcontractor is the principal.
    • Surety bonds are almost always written by insurance companies that are licensed by state insurance departments, but they are not like traditional insurance policies: surety bonds are three-party agreements and traditional insurance policies, such as life insurance or property insurance policies, are two-party agreements.
    • The surety does not assume the primary obligation but is secondarily liable if the principal defaults on its bonded obligation.
    • A surety does not expect to suffer losses because the surety expects the bonded principal to perform its contractual obligations and because the surety has a signed indemnity agreement from the contractor to protect the surety from any losses the surety suffers as a result of having issued bonds.
    • A general agreement of indemnity is a contract between a surety company and a contractor that obligates the contractor and other indemnitors to protect the surety company from any loss or expense that the surety has as a result of having issued bonds on behalf of the bond principal, and if the contractor fails to fulfill its bonded obligation and the surety suffers any loss, the indemnitors are legally bound to indemnify, or pay back, the surety for its losses.
    • A fundamental concept of suretyship is that the surety will not sustain a loss; the surety expects to be indemnified and reimbursed for any payments or losses by the principal and indemnitors under the indemnity agreement, so the general agreement of indemnity is needed before the surety issues any bonds and applies to all bonds issued by the surety for the principal.
    • A surety company that issues bonds on behalf of a contractor almost always requires that the principal, the individuals who own or control the company, their spouses, and often affiliated companies sign the general agreement of indemnity.
    • Obtaining bonds is more like obtaining bank credit than purchasing insurance, and almost all sureties consider financial capacity, net worth, cash flow, assets, credit score, work in progress, work history including expertise and experience, banking relationship, nature of the project to be bonded, and character of the contractor.
    • The main types of contract surety bonds are bid bonds, performance bonds, payment bonds, and warranty bonds, sometimes called maintenance bonds.
    • Under a bid bond, the surety's liability is generally limited to the face amount, or penal sum, of the bond, which is typically in the range of 5 to 20 percent of the contract bid price.
    • The cost of a bond is based on rates filed by insurance companies with the state insurance department and is based on the contract amount; it can vary from less than 0.5 percent to as much as 3 percent of the contract price, and for a small and emerging contractor with minimal experience a contractor can expect to pay 2 to 3 percent of the contract price.
    • Bonds must be paid when they are executed, and bonds are non-cancelable.

    Downloaded 2026-08-31 and extracted with pdftotext, then read the relevant question and answer blocks directly. This is a trade association publication and is labeled secondary. It is used for the three-party structure, the credit-versus-insurance contrast, the general agreement of indemnity, bid bond penal sums, and pricing practice. Statutory and regulatory points rest on primary sources instead. The document's penal sum statements are specific to bid bonds and to dual obligee savings clauses; no general penal sum rule is claimed from it here.

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