There are many different types of surety bonds.  However, as many as there are, they can generally be grouped into 6 different categories: contract bonds, license and permit bonds, public official bonds, judicial bonds, federal surety bonds, and miscellaneous bonds.  Those bonds most directly affecting contractors are contract bonds and license and permit bonds.

Bid bonds: This guarantees an owner that a party bidding for a contract will, if the bid is accepted, enter into a contract and furnish other necessary bonds.  The bid bond guarantees to pay the owner the difference between the amount of the bid and the bid finally accepted.

Performance bonds: This guarantees the owner that work will be completed according to contract specifications.  A performance bond is the key bond in a work project because the owner of a project not only wants the work completed - usually within a specified time- but also completed according to specifications. If the principal does not fulfill either or both of those promises, the surety is obligated to satisfy the owner.

Payment bonds: This bond, also referred to as a "labor and materials" bond, guarantees that bills for labor and materials used in the work will be paid as they become due.  This coverage is usually automatically included in the performance bond so no additional charge is necessary. But, if this bond is written wholly apart from the performance bond, there is an additional charge.

Maintenance bonds: This bond carries the guarantee that faulty work of the principal will be corrected or defective materials will be replaced. A performance bond sometimes includes this maintenance guarantee for one year without additional charge.

License and permit bonds: These bonds are required by those who must obtain licenses or permits from cities, towns or political subdivisions before they can proceed with various activities. These bonds, although used for a variety of purposes, usually guarantee that the persons who post them will comply with statutes, regulations or ordinances that regulate their activities.