A Payment Surety Bond protects the owner of a construction project. It guarantees that a contractor will pay all suppliers and sub-contractors for labor and materials. The bond may be a requirement of any contract size and class of business and helps prevent liens on the project.
The bond is a legal contract between three parties: the project owner (the obligee), the contractor (the principal), and the surety company. The bond guarantees that a contractor will faithfully perform all duties set forth in the contract, which can include a specific time that payments will be made, and the amount of the payments.
If the contractor fails his obligations, then the project owner may submit a claim on the bond to the surety company. If the surety finds that the contractor is at fault, then the surety assumes responsibility and will see that the suppliers and labor are paid. The contractor is then obligated to reimburse the surety for the expenses and legal fees, if any.
Because the surety assumes responsibility when a contractor fails to fulfill his obligations, the surety company wants to make sure the contractor is a low risk before issuing a bond in the first place. Contractors will need to provide the surety information such as financial statements, business information, references, tax returns, a business plan, a bank reference letter, and a job cost breakdown. Underwriters analyze the information to determine if the contractor qualifies for the bond, what the premium will be, and if there are any other factors that increase the risk. The underwriter then approves or denies the bond application. If approved, the underwriter determines terms of the approval, which includes the premium to be charged.
A Payment Bond is usually required in conjunction with a Performance Bond and they are often referenced as a single surety bond, Payment and Performance Surety Bond.
New contractors that plan to bid on a project, or need a payment and performance bond and are interested in the SBA Surety Bond Guarantee Program, please complete our Bond Kit.
Items needed to request a bid bond:
The premium that you pay for a Payment Surety Bond is dependent on the contract amount, work on hand, experience, and other factors. Contact the Surety Bond Specialists at SuretyGroup.com for a free quote that fits your specific needs.
Also, ask us about our free bid bonds.
SuretyGroup.com is licensed to write all contract bonds in all 50 states, and many contractors qualify for free bid bonds.
Check out our FAQ page or What’s a Surety Bond? page. Should you need or choose to buy a surety bond, buy from us. SuretyGroup.com has been underwriting surety bonds throughout the U.S. for more than 35 years. When you work with us, you enjoy the unique benefit of dealing with a team of highly experienced surety agents with in-house underwriting authority. This allows you to receive competitive, low rates, quick approvals, and immediate bond delivery. In most cases, your bond will be delivered within 24 hours after you apply for it.
For a downloadable application