Contractor Bonds: Bid Bond
Contractor bonds like the bid bond guarantee you will do the job at the price you bid.
Performance bond
Usually written when you are awarded the bid to guarantee you will finish the job to the contract specifications within the time allowed.
Payment bond
Goes with the performance bond at no extra cost to guarantee you will pay your suppliers.
Notary bond
Click here to purchase a Notary Bond
Price and how it works
Contractor bonds are not like insurance, they’re more like banking. The bonding company never expects to pay a claim, and if they do you have indemnified them corporately and individually so they can go after any asset you own to pay them back!
Bonding companies underwrite the risk at the Bid bond level so they can write the performance & payment bond if you are awarded the bid.
*If you have a good credit score (over 675), we offer a “Line of Surety” up to $250,000 per job and $400,000 aggregate.
If your bid was more than 10% lower than the next lowest bid you will need to explain to the bonding company why you can do the job for so much less. (take note of the 3 bids above you)
Bid Bonds may cost $100 or $200.
Performance/Payment bonds will cost 3% of the contract price, so you need to pump that amount into the bid. This rate may go down after you build a track record of performing the contract.
Various cities have their own bond forms they want used. You will see this in the sample contract you are given in the pre-bid meeting. The sample contract will also advise what the “liquidated damages” are for each day you go past the deadline. You will need that information to put on the Bond request form. Your Company is the Principal. The one you are doing the work for is the Obligee. We will need the address for the Obligee and a copy of the contract.
Some Cities (Mesa, AZ & Glendale, AZ) have additional insurance requirements, so you will want to fax the insurance page of the contract, prior to bidding in order for us to advise a ballpark figure of the additional cost.
If you want to bond a job over $250,000 it is much more complicated. The application is 6 pages long and you will need to attach CPA reviewed or compiled business and personal financial statements. Bonding companies look primarily at the 3 C’s: Character, Capacity and Capital. In other words, if you can get a bank line of credit for the contract price you may be able to get a bond. If you can’t, you won’t.
Building a bonding line of credit is baby steps. Keep a journal of jobs you have completed (including Owner’s name and which Sub’s you used and suppliers). After you have established a track record of completing ever increasing contract amounts and secure a construction accountant, the bonding company will allow you to increase your contract amounts.
Who Needs Contractor Bonds in Arizona
Most licensed contractors working in Arizona will run into contractor bonds at some point, whether bidding on a city project, applying for a license, or taking on a larger job that requires proof of financial backing. General contractors, subcontractors, and specialty trades all commonly need contractor bonds before they can legally operate or bid on certain work.
Common scenarios where Arizona contractors need contractor bonds include:
- Applying for or renewing a contractor license with the state
- Bidding on municipal or public construction projects
- Being awarded a contract that requires a performance and payment bond
- Working with cities that have their own bond and insurance forms, such as Mesa or Glendale
- Growing a business and needing a larger bonding line of credit to take on bigger jobs
Arizona summers, monsoon storms, and dust can slow down job sites, but they don’t change the bonding requirements tied to your license or contract. Having contractor bonds in place ahead of time keeps your bidding process moving without delays.
Arizona Requirements for Contractor Bonds
The Arizona Registrar of Contractors requires licensed contractors to post a contractor license bond, or in some cases a cash deposit, before issuing or renewing a license. The required amount depends on your license classification and annual volume of work, so contractors with larger projects or higher revenue typically need higher bond amounts.
Beyond the license bond, many contracts call for additional contractor bonds, including bid bonds and performance and payment bonds, especially on public or municipal jobs. The ROC does not require general liability insurance for licensing, but general contractors, property managers, HOAs, homeowners, and commercial contracts commonly ask for proof of general liability through a certificate of insurance, often with additional-insured wording.
Arizona also requires most employers with one or more employees, including part-time workers, to carry workers’ compensation coverage. Sole proprietors with no employees generally are not required to carry it. For full details on licensing and bonding requirements, you can check directly with the
Arizona Registrar of Contractors before you bid or renew your license.
Why Get Contractor Bonds Through CIA
Contractors Insurance Agency (CIA) works with Arizona contractors every day on contractor bonds, general liability, workers’ compensation, commercial auto, builder’s risk, inland marine and tool & equipment floaters, umbrella/excess liability, and life and key-person insurance. We’re also the insurance partner of the Arizona Contractor License Center (AZCLC), the contractor licensing school, so we understand how licensing and bonding fit together.
When you need a certificate of insurance for a bid deadline, we offer same-day COIs. During business hours, you’ll get a callback within 1 hour, and quotes are typically ready within 24 hours. Spanish-speaking agents are available to help walk you through your contractor bonds and coverage options.
CIA has offices in Phoenix, Mesa, Peoria, and Tucson, so there’s likely a location near your job sites. Our Phoenix office carries a 4.9-star rating from 111 Google reviews, reflecting the kind of service contractors have come to expect from us.
Ready to get started on your contractor bonds or other coverage?
Request a quote or call us at
877-404-0707.
