Check the bid form and the instructions to bidders first. If they mention bid security, a bid bond, or a percentage of your bid amount, you need a bond, and the insurance section is a separate requirement on top of it. A bid bond is a promise to the owner that you will sign the contract if you win. Most private bids ask for insurance only. Public work usually requires both. Who this is for: contractors opening a bid package that mentions both.
The short version
- Insurance and bonds are different products from different companies. A bid can require one, the other, or both.
- A bid bond promises you will sign the contract if you win. State and local bids usually want 5 to 10 percent of your bid, federal sealed bids 20 percent.
- Public work usually requires both: a bid bond with the bid, then performance and payment bonds when you sign.
- Private bids usually require insurance only, though larger owners and lenders sometimes ask for bonds too.
- Insurance is proven at award. The bid bond goes in with the bid, so start the bond first.
How can I tell which one this bid requires?
They live in different parts of the package and use different words.
| Where to look | Words that mean a bond | Words that mean insurance (ask your broker what each one costs) |
|---|---|---|
| Bid form and instructions to bidders | "Bid security," "bid bond," "bid guarantee," "5 percent of the bid," "certified check," "surety" | "Evidence of insurability," "sample certificate" (rare at bid stage) |
| General conditions and supplementary conditions | "Performance bond," "payment bond," "labor and material bond," "100 percent of the contract sum" | "Maintain coverage," "limits of liability," "three years after completion" |
| Insurance exhibit (often Article 11 or near the back) | Rarely anything | "Certificate of insurance," "additional insured," "per occurrence," "umbrella," "waiver of subrogation" |
Bond language means you need a surety, the company that issues bonds. Insurance language means an insurance company. Those five insurance phrases are the ones to hand your broker. Each is a limit or a piece of wording your policy either has or does not. See certificates for government contracts.
What is the difference between a bid bond and insurance?
| Bid bond | Insurance | |
|---|---|---|
| What it promises | That you will sign the contract if you win. If you back out, the surety pays the owner the difference to the next bidder, up to the bond amount. | That the insurance company will pay for injuries or property damage caused by your work |
| What you pay | Often nothing for the bid bond itself. Performance and payment bonds run roughly 1 to 3 percent of the contract, illustrative. | Roughly 1 to 4 percent of contract value, illustrative |
| If it pays out | You owe the surety back. A bond is credit, not insurance. | You owe your deductible, the part of a claim you pay yourself first. The insurance company pays the rest up to your policy limit. Anything above that is still yours, and a claim can raise your renewal price. |
| When it is due | With the bid | At award or before you start work |
The last two rows matter most this week. A bond claim comes back to you, and the bond is due first. See surety bond vs liability insurance.
When does a bid require both?
Public work, almost always. On federal construction work the Miller Act requires performance and payment bonds (promises that you will finish the job and pay your subs and suppliers). It covers federal construction contracts over $100,000, and federal purchasing rules require the bonds over $150,000, with a smaller form of payment protection below that. Federal sealed bids that require a performance bond usually want bid security of 20 percent of your bid price, up to $3 million. State, county, city, and school bids are usually 5 to 10 percent. Every state has its own version, often called a Little Miller Act, with its own threshold. Those agencies publish insurance requirements too.
Private work, sometimes. Most private owners and general contractors ask for insurance only. Larger owners, lenders, and big projects sometimes require bonds from subcontractors. If the word "bond" appears anywhere in a private bid, ask early.
What do I need to get a bid bond?
A surety wants to know you can finish the job. The first application asks for two or three years of financial statements, your credit, a list of completed jobs, and references. A new surety account can take one to two weeks. Each bid bond after that takes a day or two.
Many insurance brokers also arrange bonds, or work with a bond agent who does. Background: surety bonds.
Does the bond change what the insurance section asks for?
No, but public bids that require bonds usually ask for more insurance than private ones. Expect a larger umbrella (a second layer of coverage above your other liability policies) and sometimes pollution coverage. Both the bond and the certificate of insurance (a one page summary of your policies) must show the public entity's exact legal name, so copy it from the bid form. Price it now, prove it later: see buying the insurance before you win.
What this looks like in real life
Illustrative example. It is typical of what we see and is not a promise of how any specific situation would be handled.
The setup: A sitework contractor in Massachusetts with fourteen employees bids his first town road project, a $900,000 job. Bids are due in eight days. His insurance already meets the exhibit. He has never had a bond.
What went wrong: The instructions require bid security of 5 percent, a $45,000 bid bond. He starts the surety application on day three. His bookkeeper takes a week to produce the financial statements the surety needs. The bond is not ready on bid day, and a bid without the required security is thrown out as nonresponsive, no matter how good the price is.
What it cost: Illustrative figures: about $4,000 of estimating time, and roughly $70,000 of expected gross profit that went to a competitor who already had a surety.
The fix: The insurance was fine. The bond was the bottleneck. Open the surety account before you find the job you want, and read the bid form the day the package arrives.
Frequently asked questions
Q: Does this bid require insurance, a bid bond, or both?
Check the bid form and instructions to bidders for bond words like bid security, surety, or a percentage of the bid. Check the insurance exhibit for limits and certificate language. Public work usually requires both, private work insurance only.
Q: What is a bid bond in plain English?
It is a promise to the owner, backed by a surety company, that you will sign the contract and provide the final bonds if you win. It is credit, not insurance: if the surety pays the owner, you repay it.
Q: Does my insurance broker handle bonds too?
Many do, either directly or through a bond agent. Bonds come from surety companies and run on your credit and financials, so give yourself one to two weeks for a first bond.
Q: How much does a bid bond cost?
Often nothing for the bid bond itself once a surety has approved you. The performance and payment bonds run roughly 1 to 3 percent of the contract price, illustrative.
Q: What happens if my bid arrives without the bid security?
The bid is opened and read, then thrown out as nonresponsive, no matter how good the price is. Public owners have little room to waive it. Check the bid form for the security amount the day the package arrives.
Q: Can I use a certified check instead of a bid bond?
Many public bids allow a certified check for the same amount. It ties up your cash until award and does not prove you can get the performance bond.
How Morrow helps
Morrow is a licensed independent commercial insurance brokerage that works with contractors and trades every day. Sorting a bid package into what needs a surety and what needs an insurance company, then marking up the insurance section in plain English, is a routine part of what we do.
- Free contract review. Send us the contract or bid documents and we mark up the insurance section in plain English, whether or not you buy anything from us.
- Free, instant certificates. Clients issue their own certificates of insurance online in about a minute, any hour, any day, at no charge.
- Markets you cannot reach online. One application, shopped across many insurance companies for general liability, workers comp, auto, umbrella, and pollution coverage.
One more thing. This article is general information and is not legal advice or a statement of coverage. Your contract and your policy wording control in every case. Requirements vary by customer, by state, and by insurance company, so have a licensed advisor review your own contract and your own policy before relying on any of it.
Last updated: Reviewed by the Morrow commercial lines team. Last updated September 2026.