Bid bonds are most often found in the construction or other industries that commonly bid on projects and contracts. They help prove to your potential client that the bid you submitted was in good faith and that you will enter the contract and complete the work at the price you bid.
Bid bonds help prevent potential contractors from submitting a low bid just to win a contract and then changing the price or amount or type of work the contractor will perform. If the contractor fails to honour the terms of their bid and the potential client needs to find another contractor, the bid bond will compensate the potential client for the cost difference between the initial bid and the next-lowest bid.
A bid bond protects the potential client rather than the contractor. So why would a contractor purchase bid surety insurance? Many potential clients require bid bonds in order to protect themselves. It’s also a great way to demonstrate that you’re a serious bidder on a project and intends to do the work as agreed.