What is a "hard bond" in surety bonding?

A "hard bond" in surety bonding refers to a bond that is more difficult to obtain due to the high risk associated with the project or the principal requesting the bond. In the surety industry, bonds are classified based on the perceived risk involved. A hard bond often requires a more rigorous underwriting process, reflecting the surety's need to assess the likelihood of a claim being made against the bond. This increased scrutiny makes such bonds challenging to secure, often requiring the principal to provide additional financial documentation or collateral to mitigate the surety's risk.

The term contrasts with a “soft bond,” which is easier to obtain, typically associated with lower-risk situations where the applicant's creditworthiness is stronger. Understanding this distinction is crucial for anyone involved in the surety bond industry, as it impacts both the bonding process and the types of projects that can be legally guaranteed.