Installing ducts and showers, building small additions, or putting in new toilets usually won’t require a contractor’s bond. For the larger projects—those big jobs that might make or break your year, when you add employees, or when you take on swimming pools and whole new buildings—you will often need to be bonded.
Federal law, commonly known as the Miller Act, requires many federal construction contracts above a dollar threshold to be supported by contractor bonds. If you are working as a subcontractor, the prime contractor may handle bonding for the project; otherwise you will need your own bond to demonstrate you can complete the work professionally.
Some clients also prefer or insist on bonded contractors even on smaller jobs, so getting bonded can make it easier to win work beyond the very large contracts.
There are different bond types: contract bonds let you bid and perform on a specific job, while license or contract license bonds authorize you to operate in a jurisdiction or trade. Depending on the work you do, specialty products are available, such as Dealer Bonds or Asbestos and Lead Paint Abatement Bonds.
A surety bond is not the same as insurance. When a surety issues a bond for you, the surety pays claims on your behalf but expects you to reimburse those amounts. In other words, the bond functions like a line of credit rather than an insurance policy; your own insurance might help cover related losses, but bond claims generally become your responsibility to repay.
How much bonding costs varies. Underwriters consider factors such as the size of the bond, the contract amount, your company’s financial strength, credit history, and experience on similar jobs. Planning those costs into project bids helps avoid surprises when a bond is required.
If you are unsure which bond you need for a job or how bonding will affect your bid, talk to an agent.
Frequently Asked Questions
When do I need a contractor's bond?
You typically need a contractor's bond on larger projects, many federal contracts, or when a client explicitly requires it as part of the contract terms.
Can a subcontractor avoid getting bonded?
Sometimes—if the prime contractor provides the required bond, subcontractors may not need their own, but contract terms determine responsibility.
How does a bond differ from insurance?
A bond is a credit instrument where the surety pays claims and expects reimbursement; insurance absorbs losses without requiring repayment by the insured.
What affects the cost of a contractor bond?
Bond cost depends on the bond amount, the contractor's credit and financials, business experience, and the specific risks of the contract.