PAYMENT & PERFORMANCE BONDS
With this bond, the surety guarantees to the obligee that its bonded principal will complete the bonded project according to the terms of the contract between the principal and obligee. The dollar amount of the Performance Bond is usually the same amount as the bonded contract.
This bond guarantees that the contractor's laborers, suppliers, subcontractors, etc. will be paid if the contractor fails to pay them pursuant to the terms of their contracts. Payment Bonds are usually required by obligees along with Performance Bonds. Typically, the dollar amount is the same amount as the Performance Bond, although some obligees occasionally require only a 50% Payment Bond, or no Payment Bond at all. Remember, the premium rate is based on the amount of the bonded contract- not the dollar amount of the bonds.