Payment bonds are agreements between an owner or contractor and a bonding company. The company agrees to pay for costs if anything goes wrong during construction, such as non-payment by the client, fire, or theft. The repayment can range from $500 up to 100% cost incurred depending on individual circumstances. For example, if your project was completed, but you were never paid for it due to bankruptcy or other reasons that aren’t your fault. This type of bond would cover any losses (minus reasonable expenses).
Performance bonds are guarantees made by subcontractors, suppliers, or third-party organizations to the supply chain to secure a contract. The most common performance bond is in construction. The insurance company will guarantee that all work required under the agreement will be performed and finished before it pays out any funds. This technique ensures that if the company defaults on its obligations for whatever reason during a project, then it must reimburse any costs incurred up to that point by the client.