Get bonded with Mountainside Insurance Management.

A surety bond is a three-party agreement where a bonding company guarantees you’ll fulfill a contractual or legal obligation. Unlike insurance, which protects you against your own losses, a bond protects the other party (often a project owner or government agency) — and if a claim is paid out, the bonding company expects you to reimburse them, not absorb the loss like an insurer would.

A performance bond guarantees you’ll complete a contracted project according to its terms; if you don’t, the bonding company covers the cost of completion. A payment bond guarantees you’ll pay your subcontractors and suppliers on the project. Public construction contracts often require both together.

Yes, they serve different purposes. General Liability covers third-party injury or property damage claims, while a bond guarantees contractual performance or financial obligations. Many public projects and larger private contracts specifically require bonding before you’re even eligible to bid, regardless of your liability coverage.

Bonding companies evaluate your business’s financial strength, credit history, work history, and management experience — often called the “three Cs”: character, capacity, and capital. Stronger financials and a solid track record of completed projects generally translate to higher bonding capacity and lower premiums.

Beyond contract bonds like performance and payment bonds, many businesses need license and permit bonds required by state or local licensing boards, or fidelity bonds that protect against employee theft or dishonesty. The specific bonds required depend heavily on your industry and the jurisdictions you operate in.

If a valid claim is paid out by the bonding company, they will seek reimbursement from you (and often from personal guarantors on the bond) for the full amount paid — bonds aren’t a substitute for handling your obligations, they’re a guarantee to the other party that backs them with your own indemnification.