Payment VS Performance Bond
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.
Requirements for Performance Bonds
Performance bonds are a type of insurance policy brokers purchase from agencies that provide financial security when a completed project defaults. They serve as one component to fulfilling construction contract obligations. Their requirements vary depending on the scope of the work at hand. Suppose you choose to provide business financials when applying for a performance bond.
In that case, the surety company will expect you to provide the following documents:
At Northwest Insurance Agency, we specialize in helping our clients apply and qualify for surety bonds at the best rates possible.
If you’d like to explore the possibility of getting a bond, we’d be glad to help. We can also answer any questions you have about the process. Call us on 1-214-352-5656 today!