Nationwide offers four types of bonds: contract, commercial, court and fidelity bonds, as of 2015. Contract bonds ensure that a contractor follows the terms of the construction contract. Commercial bonds protect individuals from contractors who don't follow government regulations. Court bonds cover individuals in cases of loss occurring because of court decisions. Fidelity bonds guarantee protection from theft by employees, says Nationwide.
Contract bonds work well for small- to medium-size contractors. Examples of such contractors include landscapers, masons, electricians, painters, carpenters and plumbers. They should be the kind of individuals who pay their bills on time, have the support of bank lines of credit and good references from their customers, says Nationwide.
Contract bonds fit into one of four categories: bid, performance, payment and maintenance bonds. Bid bonds ensure that if awarded, the contractor enters into a contract and furnishes the bonds by following the contract. Performance bonds offer a guarantee of a contractor following the performance as termed in the contract. They also ensure the furnishing of supplies. Payment bonds ensure that clients produce the agreed upon payment for work and materials according to the contract, and maintenance bonds protect from loss in case of defective materials, notes Nationwide.