What is a Payment Bond?

1. What is a Payment Bond? People often confuse performance and payment bonds as the same type of bond. Although payment bonds are required on construction projects along with performance bonds, both have different purposes. Payment surety bonds are a guarantee that the contractor will pay all workers, material suppliers, & contractors per contractual obligations. Performance surety bond are usually issued for 10% to 20% of the agreement amount but may be fixed by local laws. Anyone can claim this bond but are liable to the condition that, who so ever is in the position to file a lien on a private project, may make a bond claim on a public project. Performance bond can have any face value, but they are generally issued in an amount equal to 50% of the value of the construction contract. If you need a performance bonds, payment bonds, or both a performance and payment bonds, the premium remains the same. However, the cost can vary broadly from organization to-organization, but there are some general guidelines which recommend that the rate is 3% for all bonds that are $250,000 & less. For organizations with a bad credit history, the bond rates would be higher as there is more work & risk involved to get a bond issued. To know more, visit: http://www.suretybondprofessionals.com/performance-payment- bonds/