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What is a Payment Bond
A payment bond is a surety bond that is issued to a contractor for a project that ensures subcontractors, laborers, and material suppliers are paid for the work they do in a timely manner. Unlike a performance bond that ensures satisfaction of the completion of a project, a payment bond ensures that the right people get paid for their work no matter the outcome of the project. This surety bond is required by the contractor before the start of the project. A payment bond is an agreement between the person requesting the bond (usually subcontractors, material suppliers, or laborers) and the principal (usually a contractor) who holds the bond, acknowledging that if payment is not made in a timely manner, the obligee can make a claim on the payment bond and the surety will pay the compensation to appropriate parties.
Everything You Need To Know About Payment Bonds
When do you need a Payment Bond?A payment bond is typically issued with a performance bond after a bid is won. Depending on the project, whether it is federal or private, this surety bond is usually required before the commencement of a project. All federal projects over $100,000 will require a payment and performance bond. These bonds also come with clear contracts and bonding agreements laid out to ensure that all parties know what is at stake and what is being agreed to.
How does a dong claim effect your business?The goal is to avoid a claim being made against your surety bond, and a lot of times your surety company can help you avoid a claim by working with you to help solve the financial issue. A claim on your bond can be detrimental and make acquiring a bond in the future very difficult. If a claim is made, it should be dealt with immediately by the principal of the bond. Having a claim on a bond will also steer people away from wanting to work with you in the future.
What is the Claim Process?When filing a claim, there are always strict guidelines that the claimant must follow if they want the claim to be accepted by the surety. These claims are never taken lightly and an investigation will be held to ensure that both parties are taken care of properly and know exactly what is to follow. If the surety concludes that the claimants are in the right and and the contractor has failed to pay the subcontractors, laborers, and/or the suppliers, the surety will compensate all appropriate parties and the contractor will be responsible for paying back the surety.
Cost of a payment bond?The payment bond is typically a percentage of the contract you won during the initial bid. Bonds work similarly to insurance in that you only pay a fraction of the actual bond amount, known as a premium. The amount you pay for the surety bond is only a portion of the entire bond amount. Your personal credit score will affect your chances of getting a payment bond as well as decipher the premium amount. The better your credit score, the lower your premium amount will be, ranging between 1 and 4 percent.
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Why Choose The Surety Place
As industry leaders, The Surety Place is constantly working with our surety partners to create faster, easier and less expensive ways for our clients to obtain bonding. Some programs are exclusive to us as a firm, and others are made available across the country and have changed the way a surety producer does business. If you need a performance bond, payment bond, or any other type of bond, no matter what your need, we can supply the solution.
Call Surety For your Payment and Performance Bond
At Surety Place we know that obtaining any kind of bond can be time consuming and extremely difficult. That is why we work each day to improve our processes and ensure that our relationships with surety partners are always excellent. We are here to serve you and help you obtain any type of surety bond in the easiest, most convenient way. Call us today for all of your surety bond needs.