Phil Pavarini is a licensed insurance producer and is compensated when a bond is placed through this site. This page is general information, not legal, tax or fiduciary advice, and it is not a substitute for reading your plan document or contract or for advice from your own counsel. Figures shown are current as of the date on this page.
When a city builds a firehouse, the contractor has to post a performance bond and a payment bond before the first shovel goes in. The federal Miller Act requires both bonds on federal construction contracts over $150,000, and every state has a similar law for its own public work. If the contractor walks away, the surety finishes the job or pays. If the contractor stiffs the electrician, the electrician claims against the bond.
Homeowners almost never get that protection, even on a project that costs more than the firehouse roof. Nobody requires it, most contractors have never been asked for it, and many surety companies simply will not write a bond where a private homeowner is the protected party.
The Homeowner Protection Bond is our name for exactly that bond, placed on a private residential contract. It is not a new or invented product. It is a standard contractor performance bond, payment bond, or both, with the contractor as principal, the homeowner as obligee, and a surety company standing behind the contract.
The short version#
Pick the page written for your side of the contract:
- You are the homeowner. You require the bond in the contract. You never apply and you never pay the surety. The homeowner guide
- You are the contractor. You apply, you are underwritten, you sign the indemnity, and you can price the premium into the job. The contractor guide
- You are the homeowner’s lawyer. The clause you write is the first thing the underwriter reads, and the surety’s form is yours to review before signing. The attorney guide
Two bonds, two different problems#
The performance bond answers the question every homeowner actually worries about: what happens if the contractor stops showing up. It guarantees the contractor will perform the contract as written, including warranty obligations the contract imposes. On a valid default the surety steps in. Depending on the bond terms it may finance the original contractor to finish, bring in a replacement, or pay the homeowner, up to the bond amount.
The payment bond answers a question most homeowners do not know to ask. If the contractor takes your money and does not pay the lumber yard or the plumbing sub, those unpaid parties may be able to put a mechanic’s lien on your house, and the FTC has warned consumers about exactly this. The payment bond gives them a source of payment that is not your property.
They can be written separately or together. On most home projects where a bond is worth having at all, both are.
Is the bond requirement already in your signed contract? Apply for this bond, or read the full bond details.
Who does what#
| Party | Role on the bond | What they do |
|---|---|---|
| Homeowner | Obligee, the protected party | Requires the bond in a signed contract that states the amount. Never applies, never pays the surety. |
| Contractor | Principal | Applies at the homeowner’s request, is underwritten, signs the indemnity, pays the premium. |
| Surety | Guarantor | Underwrites the contractor, supplies the bond form, handles any claim. |
| Homeowner’s attorney | None on the bond | Writes the requirement into the contract and reviews the surety’s form before signing. |
The single rule that surprises people: the contractor cannot buy this bond on its own initiative. It is issued only when the homeowner requires it in the contract. A bond offered by the contractor as a sales feature is declined.
What it costs and what qualifies#
Premium generally runs 3 to 5 percent of the bond amount, set by the surety from the contractor owners’ credit, the contractor’s experience on jobs of similar size, and how clearly the contract defines the work. On a $150,000 addition bonded at full contract price, that is roughly $4,500 to $7,500, and the contract price can account for it.
Projects usually need a contract price of at least $10,000. The contract has to be a real signed construction contract. Purchase orders and work orders do not qualify. Every job is reviewed by the surety individually.
Why a contractor license bond is not the same thing#
Many states require contractors to carry a license bond. It is easy to assume that covers you. It almost never does in any meaningful way.
A license bond is a fixed amount set by the licensing board, and it is shared by every person with a claim against that contractor. California’s, one of the larger ones, was raised to $25,000 in 2023. That $25,000 is the whole pot for every customer, supplier and worker the contractor fails at once. It is not sized to your project and it is not reserved for you.
A performance and payment bond is written for your contract alone, usually at or near the full contract price. Federal construction sets both bonds at 100 percent of the contract price under FAR 52.228-15, and many private owners copy that standard.
In this section
Common questions
Is the Homeowner Protection Bond a real surety bond?
Yes. Homeowner Protection Bond is our program name. The bond itself is a standard contractor performance bond, payment bond, or both, issued by a surety company, with the contractor as principal and the homeowner named as obligee.
Who applies, the homeowner or the contractor?
The contractor. The homeowner requires the bond in the construction contract and names the amount. The contractor applies, is underwritten and pays the premium. The homeowner never applies.
Can a contractor buy one to stand out from other bidders?
No. The surety writes it only when the homeowner requires it in a signed contract. A contractor offering a bond on its own initiative will be declined. If a customer wants it, the customer writes the requirement into the contract and the contractor then applies.
What size project qualifies?
Projects usually need a contract price of at least $10,000. Remodels, kitchen and bath work, additions, new custom homes, roof replacements and other major residential work are all candidates. Each project is reviewed individually by the surety.
How much does it cost?
Premium generally runs 3 to 5 percent of the bond amount, depending on the contractor owners’ credit, experience on similar jobs and the contract terms. The contractor pays it, and the contract price can include it.
Contract signed with the bond requirement in it?
The contractor applies, with a copy of the signed contract. The surety reviews the owners’ credit, the contractor’s experience and the contract terms, then quotes. Projects usually start at $10,000.
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