How to Get a Surety Bond as a Contractor in Ontario (2025 Guide)
Securing a surety bond is essential for Ontario contractors bidding on public or large private projects. Governed by the Ontario Construction Act (R.S.O. 1990, c. C.30), supported by Ministry of Labour, Immigration, Citizenship and Inclusion (MLICI) compliance expectations, and aligned with WSIB registration and Trade Qualifications (Ontario College of Trades transitioned to Skilled Trades Ontario), bonding protects owners, subcontractors, and suppliers. This guide outlines exactly when bonding applies, which bond type you need, how to apply, and realistic cost expectations — all grounded in current Ontario law and practice.
1. What Is a Surety Bond in Ontario?
A surety bond in Ontario is a three-party agreement where a licensed surety company guarantees a contractor’s (principal’s) contractual obligations to an owner or government entity (obligee). Unlike insurance, it’s a credit-backed guarantee — if the contractor defaults, the surety investigates and may complete the work or compensate losses. Under the Construction Act, bonds are enforceable instruments tied to lien rights and holdback provisions. Bonds must comply with s. 85–87 of the Act for public projects and are increasingly required by private owners exceeding $500,000. Contractors must also maintain valid WSIB registration (per Occupational Health and Safety Act) and, where applicable, Skilled Trades Ontario certification (e.g., for electricians, plumbers) before bonding approval. Sureties verify these credentials during underwriting.
2. Types of Surety Bonds Required
Ontario contractors primarily use three statutory bond types: (1) Bid Bonds (typically 5–10% of bid value) secure that a bidder will enter the contract if awarded; (2) Performance Bonds (up to 50% of contract value, commonly 10–25%) guarantee full project completion per contract terms; and (3) Payment Bonds (same coverage level as performance bonds) ensure subcontractors, suppliers, and workers are paid — critical under Construction Act s. 86(1), which mandates payment bond inclusion on public contracts over $500,000. Private projects rarely require bonds unless stipulated in tender documents. All bonds must be issued by a surety licensed in Ontario (per Insurance Act, R.S.O. 1990, c. I.8) and approved by the Financial Services Regulatory Authority of Ontario (FSRA).
3. When Is Bonding Mandatory?
Bonding is mandatory under the Construction Act for all public construction contracts awarded by the Crown, municipalities, school boards, hospitals, and other public bodies valued at $500,000 or more (s. 85(1)). Below this threshold, bonding is discretionary but increasingly common for risk mitigation. Private sector projects have no statutory minimum, though owners often require bonds for contracts over $250,000. Additionally, contractors must hold active WSIB registration (per Workplace Safety and Insurance Act) and meet Skilled Trades Ontario qualification requirements (e.g., Certificate of Qualification or Apprenticeship standing) — sureties routinely validate both before issuing bonds. Failure to maintain these credentials voids bond eligibility and may trigger Ministry of Labour inspections.
4. How to Get Bonded: Step-by-Step
Step 1: Confirm eligibility — ensure active WSIB registration, Skilled Trades Ontario certification (if trade-regulated), and business registration (e.g., ON Business Number). Step 2: Gather documentation — financial statements (2 years), bank references, project history, and signed contract tender (for bid bonds). Step 3: Apply through a licensed Ontario surety broker or direct provider — avoid unlicensed aggregators. Step 4: Underwriting review — sureties assess credit, experience, and capacity per FSRA guidelines. Step 5: Sign indemnity agreement (personal or corporate) and pay premium. Step 6: Receive bond certificate — must include obligee name, bond amount, effective date, and FSRA-licensed surety seal. Per Construction Act s. 87, original bonds must be filed with the owner prior to contract commencement.
5. Costs and Typical Premiums
Premiums for Ontario contractor bonds range from 0.5% to 3% of the bond amount, depending on credit score, financial strength, project risk, and trade type. For example, a $1M performance bond typically costs $5,000–$30,000 annually. Bid bonds are often free or $100–$500 per submission. Small contractors with strong WSIB compliance and Skilled Trades Ontario credentials may qualify for sub-1% rates. Larger firms ($5M+ revenue) with audited financials often access tiered pricing. Note: Premiums are not refundable upon early contract completion. Costs exclude brokerage fees (if used), which average 10–15% of premium. All sureties must be FSRA-licensed — verify status via fsra.ca — and premiums must align with Ontario Insurance Act disclosure rules.
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Get Help with Ontario Contractor BondingFrequently Asked Questions
Do all contractors need a surety bond in Ontario?
No — only contractors bidding on public projects valued at $500,000+ are legally required to post bonds under the Construction Act s. 85. Private projects do not mandate bonding unless specified in the contract. However, many owners require bonds for risk management, especially above $250,000. Tradespeople must still maintain WSIB registration and Skilled Trades Ontario qualifications regardless of bonding status.
How much does a surety bond cost in Ontario?
Premiums typically range from 0.5% to 3% of the bond amount. A $1M performance bond may cost $5,000–$30,000 annually. Rates depend on personal/business credit, financials, trade classification, and compliance with WSIB and Skilled Trades Ontario requirements. Bid bonds are often nominal or waived for pre-qualified contractors.
What's the difference between insurance and a surety bond?
Insurance protects the policyholder against unforeseen losses; the insurer absorbs the loss. A surety bond is a three-party credit instrument: the surety guarantees the contractor’s performance to the owner. If the contractor defaults, the surety may step in — then seek full reimbursement (via indemnity agreement) from the contractor. Bonds are regulated under Ontario’s Insurance Act and require FSRA licensing, unlike general liability insurance.
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