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What is a Payment Bond?

Payment bond definition: Payment bonds are guarantees that you will pay all sub-contractors, suppliers and laborers working on the project in question. Payment and performance bonds are required for all public works contracts of $100,000 and above (due to the Miller Act).

Payment bonds cost a small percentage of the full contract amount. Larger contract premiums are usually around 1%. Smaller contracts have fewer underwriting requirements, but are priced higher at around 3%.

Payment, bid and performance bonds work together, as the guarantee of bid, performance and payment bonds are so interrelated that they are almost always required for public works jobs.

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