Types of Work Construction Bonds Can't Be Used For
It's Nearly Impossible to Get Bonded for Certain Jobs
Most surety companies in the U.S. won't provide construction surety bonds for certain lines of work; some examples include:
- Overseas projects
- Jobs on Indian reservations
- Multiyear construction jobs (three years+)
- Private home remodeling projects (unless being paid for by the government)
Why Can't You Get Bonded for These Jobs?
The answer is simple: the majority of U.S. surety companies consider most of these project types too risky to bond. Surety bonds for public construction jobs such as performance bonds are legally binding guarantees provided by the surety company that you'll complete a job according to the contract. If you don't complete the project properly, a claim can be filed which the surety will pay initially. However, you're ultimately responsible to pay the surety company back for claims. In short, bonds for construction projects protect taxpayer's dollars.
With projects overseas and Indian reservation construction jobs, most U.S. surety companies will not consider writing surety bonds to guarantee their completion because the laws differ from state and Federal laws. Since the surety bond is legally binding and the surety company is first on the hook to pay bond claims, they don't want to take the chance of providing surety bonds in a region where they're unfamiliar with the law and risk non-payment of claims.
Also, multiyear construction contracts that last for three or more years are too risky for surety companies as they are unable to determine whether a contractor will still qualify to perform the work that far down the road. For instance, if a contractor defaults on another project while also working on a three year job, it could cause them to go bankrupt, which means the contractor wouldn't be able to finish any other jobs they were working on. Find out what surety companies look for when you are applying for performance bonds.
What's Risky About Bonding Home Remodeling Jobs?
Getting construction bonds for private home remodeling projects will be impossible, not because they're too risky for surety companies, but as a result of being private jobs. As mentioned above, surety bonds for construction jobs protect the public and are used for public projects. It's possible to get surety bonds for private home remodeling jobs that are being paid for by the government, e.g. the government stepping in and paying for projects in a particular state where a hurricane caused significant damage to homes.
Construction Bonds Are Not Financial Guarantees
Performance bonds for public construction projects guarantee your performance on the project, but they are different from financial guarantees. Financial guarantee bonds ensure that payments will be made for things such as building leases or sales tax revenue. If bonds for construction projects simply guaranteed that payments would be made, more surety companies may consider writing bonds for the types of work mentioned above; however, the risk is far greater.
Author: Eric Weisbrot
Eric is an industry expert that specializes in taking complex surety concepts and explaining them in terms that make sense to the general public. He also manages the JW Surety Bonds website and works with various partners to help further educate the public on suretyship using various mediums.
What our clients have to say
"I would recommend them highly if you are in the market for surety bonds or similar products."
"When I told them how urgent my request was, they pulled out all the stops and got it done in record time - amazing!"
"JW Surety Bonds was able to get me what I needed and gave me the best price of all the bond companies I received quotes from."
"As a small business owner I was looking for a bond company that could issue me a bond at a rate I could afford, and JW Surety Bond by far gave me the best quote."
"Patsy Tinsman seems to always have the answers and goes above and beyond the call of duty to make sure we are taken care of in a timely manner. The personal service she provides makes us think we are her only client..."
"JW Surety Bonds has continued to meet or exceed my expectations in the past 3 years of business relations."
"I had a very time sensitive issue that I was needing assistance on. Cori got back to me right away (within minutes) and followed up with me constantly until we had resolved the issue."