https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AConstruction_bondDefinition:Construction bond - Revision history2026-06-13T15:56:24ZRevision history for this page on the wikiMediaWiki 1.43.8https://www.insurerbrain.com/w/index.php?title=Definition:Construction_bond&diff=10630&oldid=prevPlumBot: Bot: Creating new article from JSON2026-03-11T16:50:06Z<p>Bot: Creating new article from JSON</p>
<p><b>New page</b></p><div>📜 '''Construction bond''' is a type of [[Definition:Surety bond | surety bond]] that guarantees the performance and financial obligations of a contractor on a construction project, providing the project owner with a contractual safety net if the contractor defaults. Unlike [[Definition:Insurance policy | insurance policies]], which protect the insured party that purchases them, a construction bond involves a three-party relationship: the [[Definition:Principal (surety) | principal]] (the contractor), the [[Definition:Obligee | obligee]] (the project owner), and the [[Definition:Surety | surety company]] that underwrites the bond and stands behind the contractor's commitments.<br />
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🔗 Construction bonds generally come in three forms that work together across a project's lifecycle. A [[Definition:Bid bond | bid bond]] assures the owner that the contractor will honor its bid price and enter into the contract if selected. A [[Definition:Performance bond | performance bond]] guarantees that the contractor will complete the work in accordance with the contract's specifications and schedule — and if it cannot, the surety steps in to arrange completion. A [[Definition:Payment bond | payment bond]] ensures that subcontractors, laborers, and material suppliers are paid, preventing [[Definition:Mechanic's lien | mechanic's liens]] from encumbering the owner's property. The surety [[Definition:Underwriting | underwrites]] these bonds by evaluating the contractor's financial strength, work history, backlog, and management capability — essentially making a credit-like decision rather than a pure [[Definition:Risk | risk]]-pooling one.<br />
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🏢 Public works projects in the United States almost universally require construction bonds under the Miller Act (for federal projects) and analogous state "Little Miller Acts," making the [[Definition:Surety | surety]] market indispensable to the construction economy. For [[Definition:Insurance carrier | insurance carriers]] with surety divisions, construction bonds represent a significant revenue stream that differs fundamentally from traditional insurance in its underwriting approach and loss dynamics — surety losses trigger [[Definition:Subrogation | subrogation]] rights against the defaulting contractor, and expected [[Definition:Loss ratio (L/R) | loss ratios]] are far lower than in property or casualty lines. The construction bond market also serves as a barometer of broader economic health: bond capacity tightens when surety companies perceive rising contractor default risk, which can slow the pipeline of new construction projects.<br />
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'''Related concepts:'''<br />
{{Div col|colwidth=20em}}<br />
* [[Definition:Surety bond]]<br />
* [[Definition:Performance bond]]<br />
* [[Definition:Payment bond]]<br />
* [[Definition:Bid bond]]<br />
* [[Definition:Surety]]<br />
* [[Definition:Subrogation]]<br />
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