Contractor Payment Bonds
Contractor Payment Bonds are a type of contract bond that guarantees that a contractor will pay suppliers, laborers, and subcontractors for labor and materials. Payment bonds and performance bonds are often issued together as one bond, called a "Performance and Payment Bond".
What is a Contractor Payment Bond?
Contractor Payment Bonds are generally purchased by a contractor during the bidding or negotiation phase of a construction project. The payment bond is then submitted by the contractor to the principal of the project once the job has been awarded. Most payment bonds specify on-time and full-payment to employees, suppliers, subcontractors, and others creditors. This guarantees that all suppliers and contract employees working on a construction project will be paid and won’t quit until the project has been completed.
How Do Contractor Bonds Work In High-Risk Markets?
High-risk markets are currently very limited for performance and payment bonds. Until recently, companies were approving everyone, even individuals who did not qualify for the bond type or size. Record losses occurred throughout the industry and many surety companies went out of business. As a result, bonding companies established more rigid guidelines for approval, and the industry has stabilized.
If a claim is made on a payment bond because of nonpayment or another breach of contract, the wronged party can file a claim on the bond. If the claim is found to be valid, the issuing surety company will guarantee payment up to the financial limit of the payment bond.
The Bond Stop works with contractors everyday to find the right contractor license bond for their individual situation. Call us now at 619.464.1154 to get your Contractor Payment Bond today.