Bonds FAQs

Questions and answers that relate to Surety Bonds, including what they are designed for, how they are calculated, and how much they cost. This information is provided as a guide only. If you have any questions or concerns, please call our expert Bonds team on 020 7623 4957.

Why do I need a construction bond now?

The current economic climate has led many employers to include bonds as a contractual requirement for bidding contractors – this was previously only the case on public sector contracts to protect taxpayer funding.

Read more about why construction bonds are needed now

What are the advantages of using a broker to arrange your construction bond?

Long-term issues such as cost inflation and delays to both housebuilding and infrastructure projects have led to more insolvencies and increased financial scrutiny across the construction sector in 2023.

Read more about the advantages of using a broker to arrange your bond

What information will my Surety Broker need?

Working with a construction specialist broker is essential because they can walk contractors through the bonds process. Brokers usually outline in advance the documents required to make a formal submission.

Read more about the information a surty broker needs

How are construction bond premiums calculated? 

Premiums are assessed on several criteria, including company financial ratings, the type of bond required, and the contract wording.

Read more about how bond premiums are calculated

What is a surety or ‘guarantee’ bond?

A surety bond is sometimes referred to as a ‘guarantee bond’, or ‘contract guarantee’.

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What types of bond are available?

There are a number of different types of bond available within the UK Construction industry.

Read more about types of bond

How is a bond calculated?

Surety Bonds are normally 10% of the contract value. Retention Bonds are usually between 2.5 and 5% of the contract value, and Advance Payment Bonds are a fixed sum, depending on the advance payment value.

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How can I get a quote?

Typically, people will approach a bond specialist, like an insurance broker, who will request information as part of the application.

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How much does a bond cost?

The cost of a performance bond depends on the financial strength of the company applying for the bond.

Read more about the cost of bonds

How long does a bond last?

The duration of a bond is agreed between Beneficiary and Contractor prior to the bond being issued. Different bonds are usually in place for different periods.

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Can a bond be cancelled?

Unlike a general insurance product, a bond is a legal obligation that cannot be cancelled for any reason, other than its specified expiry provision having been achieved.

Read more about bond cancellations

What form of wording is typically used in a bond?

There are three commonly used types of bond. Conditional requires that damages need to be established and ascertained by an appointed representative before any bond claim is paid.

Read more about bond wording