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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).

What Does a Payment Bond Cost?

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%.

The percentage you must pay is also known as your rate, which can differ depending on your line of work and the state you are performing the work. Sureties file different base payment bond rates in each state depending on what type of work that needs to be bonded.

Your business financials are the most important item that will be reviewed by the surety company to determine your rate. If you demonstrate financial strength, it can lower your payment bond rates significantly. In addition, your personal credit will be considered during underwriting.

Performance and Payment Bonds Work Together

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.

Bond Claims Will Cost You

It's crucial to understand that you are responsible to pay any legitimate claims filed on your payment bond. If a claim is filed on your bond as a result of not abiding by the terms, the surety company will pay it initially, but they will come back to you for reimbursement.

Construction Jobs We've Bonded

Our company has bonded thousands of construction projects over the years. You can take a look at some of our most notable bonded projects here.

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