Why would a building owner request a contractor get a bond for 1.5 times the contract? Is that a common practice?

Sam asked this on June 20, 2017 in Surety Bonds

Danielle answered this on August 07, 2017

Hello Sam,

No, that is not common practice. Typically contact bonds related to construction projects are issued for the exact amount of the bid. If the project owner is requesting the bond amount to be 1.5 times the bid amount, they're likely worried the project will run over budget and want to be sure they're fully covered in such an event. That said, most surety companies will likely only issue a bond to cover the actual projected bid. If the project runs over, the surety company can increase the bond amount later on, which typically requires additional premium to be paid. If you have additional questions or would like to request help for a contract bond request for a new construction project, please call our team at 1 (800) 308-4358.