Bid Bonds-

A Bid Bond is almost always required for a contractor to bid on any type of government work (federal and state) and local public agencies. The Bid Bond provides assurance to these obligees that the contractor has the ability to provide a Payment and Performance Bond if it is the successful bidder.  If the contractor is the successful bidder and does not enter into a contract with the obligee, the obligee has the right to make a claim on the Bid Bond for the difference between the contractor's bid and the next bid, or the amount of the bid bond (usually 5% to 20% of the bid amount), whichever is less.  Even though sureties typically don't charge a premium for Bid Bonds, the contractor is still liable to hold the surety harmless, or reimburse the Surety for any loss it may suffer. 

Performance Bonds-

With this bond, the surety guarantees to the obligee that its bonded principal will complete the bonded project according to the terms of the contract between the principal and obligee.  The dollar amount of the Performance Bond is usually the same amount as the bonded contract.

Payment Bonds-

This bond guarantees that the contractor's laborers, suppliers, subcontractors, etc. will be paid if the contractor fails to pay them pursuant to the terms of their contracts.  Payment Bonds are usually required by obligees along with Performance Bonds.  Typically, the dollar amount is the same amount as the Performance Bond, although some obligees occasionally require only a 50% Payment Bond, or no Payment Bond at all.  Remember, the premium rate is based on the amount of the bonded contract- not the dollar amount of the bonds.  

Subdivision Bonds-

Here, the principal (owner/ developer) provides bonds to a public agency to guarantee the installation of improvements that will ultimately be dedicated to the public, but paid for by the principal.

License and Permit Bonds-

License and Permit Bonds, or Miscellaneous Bonds, are typically required by state law and municipal ordanances.  A common example in California is a Contractors License Bond which all contractors must have to do business in California. The main purpose of License and Permit Bonds is to safeguard the public health, welfare, or ensure the public's safety.  The Penal Sums of these bonds are relatively low.  Therefore, if there are many claimants on a single bond, if affords each claimant with little protection.