Business FinancesQuestion 1147 of 1605
A contractor's bond is a form of surety bond. This means:
a.A surety company guarantees payment to claimants, then seeks reimbursement from the contractor
b.Claims paid never have to be repaid by the contractor
c.The bond is a savings account owned by the contractor
d.The bond replaces the need for liability insurance
Explanation
A surety bond is a three-party agreement: the surety pays valid claims to protect the public, but the contractor (the principal) must reimburse the surety for any amounts paid. Unlike insurance, the contractor ultimately bears the cost of paid claims.
Law Reference: Business & Professions Code §7071.6Practice all 1605 questions free — no signup required.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)