What type of bond might a licensed contractor be required to obtain?

A performance bond is a specific type of surety bond that a contractor might be required to obtain as part of the contracting process. This bond serves as a guarantee that the contractor will complete the project according to the terms of the contract. It protects the project owner from financial loss in the event that the contractor fails to meet their obligations or defaults on the contract.

In the construction industry, performance bonds are commonly required for larger projects to provide assurance that the work will be completed satisfactorily and on schedule. These bonds are especially important because they not only help ensure the integrity and reliability of contractors but also promote confidence among clients in hiring contractors for their projects.

The other types of bonds listed differ in purpose and application. For instance, a liability bond may not specifically relate to project completion but could pertain to liability coverage, which deals with potential claims from third parties. An insurance bond typically refers to a type of insurance policy rather than a bond in the traditional sense used in construction contexts. A completion bond, while similar to a performance bond, specifically guarantees that the project will be completed under specific terms and conditions often tied to financing rather than general project obligations. Thus, the performance bond is the most relevant and commonly required type for licensed contractors.