Performance Bonds

A performance bond guarantees the project owner that the contractor will complete the work according to the contract — plans, specifications, and deadline. If the contractor defaults, the surety steps in: it can finance the original contractor, bring in a replacement contractor, or pay the owner up to the bond amount. Performance bonds are usually issued together with a payment bond, which guarantees subcontractors and suppliers get paid.

When are performance bonds required?

On federal construction contracts above the Miller Act threshold, performance and payment bonds are required by law. Alabama and Mississippi each have their own "Little Miller Act" requirements covering state and local public work, and many private owners, lenders, and general contractors require bonds as a matter of policy. The bid documents and contract set the exact requirement — typically a performance bond (and payment bond) for 100% of the contract price.

How performance bonds are underwritten

A performance bond is a credit decision, not a commodity purchase. The surety reviews the contractor's financial statements, work-in-progress schedule, completed-project history, and the specific contract. The premium is a percentage of the contract price and buys the surety's guarantee for the life of the project. Because underwriting takes real time, contractors going after bonded work should establish their bond line before the bid — a bid bond and the final bonds come from the same capacity decision.

Getting bonded, step by step

Start with a conversation about the project size and type, your financials, and your timeline. Smaller contracts with strong financials move quickly; larger programs are built over time as a contractor's track record grows. See our surety bond overview or call 251-333-4750 (AL) · 228-206-3853 (MS) to start.

United Risk Agency, Orange Beach, Alabama. Licensed in AL, FL & MS. Alabama agents, serving Orange Beach, Gulf Shores, Foley, Mobile and statewide across Alabama, plus the Mississippi Gulf Coast.