What is a surety bond?

A surety bond is a promise by a bonding company to pay all or a portion of an arbitration award in the event a contractor fails to pay the order. The purpose of the bond is consumer protection. A property owner can file a complaint against a contractor’s bond for breach of contract or improper work. If the state licensing board orders a contractor to pay money to the complainant, the contractor must pay as ordered. If the contractor does not do so, the bonding company will pay the money owed up to the amount of the bond. The California State Licensing Board requires contractors to carry surety bonds. The amount of the bond is determined by the contractor’s license endorsement.