Myths about Surety Bonds

When it comes to surety bonds in the construction world, it may seem an overwhelming process, which will provide an arena for multiple myths to sprout.  Believing myths as opposed to facts, can lead to costly mistakes.  Below we dispel some common myths.

Confused man and question marks. 3d rendered illustration.


  1. Have you heard of how expensive surety bonds are? This tends to scare away many small businesses from bidding on projects that require surety bonds, which in essence, loses the contractor money. Surety bonds do not have to be expensive because a bond premium costs between 1% and 3% of the contract sum.
  2. Another misconception is that surety bonds are not needed by large construction companies, because they can fund their own compensation if a claim is filed. Therefore, this puts the smaller contractor at a disadvantage.  Surety bonds are required of anyone bidding for a construction job, particularly government construction jobs.  Tied in with this misconception, is that small contracting businesses are riskier to issue surety bonds to.  This is also not the case, as small contracting businesses may have a better credit and financial history than some bigger companies.
  3. On the surety bond producer side, a common myth is that all surety companies are equal in their services. Again, a myth.  A great surety company stands out from the rest because of its years of expertise in the field, its relationship with underwriters and the customer service they provide to their clients.  The National Association of Surety Bond Producers is a great place to start when looking for a reputable surety bond producer.  Another great source is the Treasury Listing of Approved Sureties.
  4. Is insurance the same, and just as good, as surety bonds? This is also a myth. The confusion originates with an SDI (Subcontractor Default Insurance) as an alternative to a surety bond. A surety bond requires three parties, whereas an insurance policy deals with only two parties. An SDI also protects the contractor and not the owner of the project, subcontractors or suppliers (who are usually most at risk).  Surety bonds require more financial information when being applied for than SDIs, therefore ensuring more financial evaluation. Surety bonds also have a longer legal history and provide more protection than SDIs because they are regulated and offer higher protection to all parties involved.


In summary:

Surety bonds are affordable, often needing only 1-3% of the contract sum. Surety bonds are needed for all contracting companies, large and small. A surety bond is NOT the same from every company, and the quality of the surety bond depends on the expertise of the surety bond producer, as well as their relationship with underwriters and loyalty to their customers. Insurance and surety bonds are NOT the same.

We here, at are an independent bond-only agency, committed to the principles of service, integrity and professionalism. We view our clients, employees and underwriters as our “business family”. We strive to offer each and every one of them unsurpassed attention and support to ensure a mutually beneficial relationship.  We have a keen understanding that success for everyone is only possible through helping all of our constituents achieve their goals and objectives, we believe that a truly satisfied customer, employee or vendor is the best business strategy of all.  Our surety bonding services help create a blueprint for success. Our principals have relationships nationwide and have earned the trust of underwriters. Because of our credibility within the underwriting community and longevity in the industry, we are able to act as powerful advocates for our clients. We have a unique, tactical process to professionally design and present a thorough financial picture with risk and financial analyses to the surety market.