Does Your Winnipeg Construction Business Need a Surety Bond?

July 28, 2025

Do you know? A surety bond guarantees that work you’ve been contracted to do will be completed. It’s important for you to understand what type of surety bond is required for your Winnipeg construction business.

Surety bonds are common in the construction industry. It must be uniquely tailored to meet the needs of a specific project for your Winnipeg construction business.

What is a surety bond?

The three parties involved in a surety bond: the principal, the obligee, and the surety.

The principal (contractor/construction company) buys the surety bond to guarantee quality and completion of contracted work that will be done.

The obligee is the party that requires your Winnipeg construction company to buy the bond, such as a government, company, or institution.

The surety is usually a licensed insurance company (or a specialized surety bond provider) and it issues the bond and financially guarantees the principal’s ability (your Winnipeg company’s ability) to complete the contracted work.

What happens to the surety bond if you don’t finish the job?

A surety bond will pay your customer if your Winnipeg construction business does not complete a job or obligated task. If work is not completed per agreement, your client can claim the bond and receive compensation for their loss up to the bond’s limit. Once claimed, the paid-out losses are still recoverable from your Winnipeg construction company.

When do Winnipeg construction businesses need surety bonds?

Surety bonds are commonly needed when your Winnipeg construction company is bidding on government, municipal, or large commercial projects. They provide financial assurance to project owners that you, as the contractor, will fulfill the contract terms.

3 types of surety bonds:

Bid bond: It’s a type of surety bond commonly used in the construction industry during the bidding process for a project. It is a financial guarantee provided by a contractor (the principal) to the project owner (the obligee) that ensures the contractor will enter into the contract at the bid price if awarded the job and will provide any required performance and payment bonds before work begins.
Performance bond: A performance bond is a type of surety bond that guarantees that a contractor will fulfill all obligations specified in a contract. Performance bonds are typically required before work begins, especially on large-scale or public projects.
Labour and material payment bond: A labour and material payment bond is a type of surety bond used in construction projects to guarantee that the contractor will pay all subcontractors, suppliers, and laborers for work performed and materials supplied on the project.

Surety bonding demonstrates credibility and financial reliability in a competitive market for your Winnipeg construction company.

How is a surety bond different from insurance?

A surety bond guarantees performance or compliance with contractual or legal obligations. Insurance provides financial protection against unforeseen events or losses, such as fire, or vandalism.

Are there financial consequences if a Winnipeg contractor with a surety bond doesn’t finish the job?

Yes. If a contractor does not finish the job and the surety pays out on the bond to complete the construction project or compensate the project owner, the Winnipeg contractor is required to reimburse the surety for those costs.

How much do surety bonds cost for Winnipeg contractors?

The cost of a surety bond depends on the bond type, length of time for coverage, risk, the principal’s credit score and claims history, and annual revenues. That means there is not a set price for a surety bond for Winnipeg contractors.

5 FAQs about construction insurance

Is construction insurance customizable?

Construction insurance can be tailored based on services performed and in what trade, number of employees, project size, and equipment needs. You can adjust coverage limits, add optional protections (like pollution liability or cyber coverage), and select deductible amounts that work best for your construction business.

What liability coverages do construction businesses need?

Key liability coverages include: Commercial General Liability (CGL): Covers injury or damage to third parties; Completed Operations: Protects against claims after a project is finished; Pollution Liability: Important for contractors dealing with hazardous materials; Non-Owned Auto Liability: Covers liability when employees use personal vehicles for work; and Errors & Omissions (Professional Liability): Essential for design-build or consulting contractors.

How much commercial general liability (CGL) insurance is recommended?

Most contractors are advised to carry at least $2 million in commercial general liability coverage. For larger operations or those working on government or commercial projects, $5 million or more may be needed.

How does construction insurance protect contractors?

Construction insurance protects contractors from the daily risks they face on job sites. It provides financial protection against third-party injuries, property damage, equipment theft, and even lawsuits that may arise from completed work.

Do contractors need builder’s risk (course of construction) coverage?

Yes. Builder’s Risk is also called Course of Construction insurance and it’s essential for protecting projects while they are being built or renovated. This type of insurance covers fire, vandalism, theft of materials, storm or weather-related damage, and collapse or accidental structural damage. Builder’s risk insurance also protects tools and materials on-site. Builder’s risk insurance is often a requirement for contractors from lenders or project owners.