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Payment and Performance Bonds—What Are They?

September 6, 2019 By Flor Caballero Lynch

woman-1455991_960_720If you are a contractor and need to get a Payment and Performance Bond it is extremely important you speak with your insurance agent! With a lot of projects that are done for the state or federal governments—you will find that these types of surety bonds are required to be able to undertake the project!

A Payment Bond is a type of contract surety bond which guarantees that a contractor or subcontractor will pay their subcontractors, suppliers, as well as laborers for their work and all materials provided! A Performance Bond is another type of contract surety bond which guarantees that a principal will fulfill their contractual obligations within a project! Reason why is the government wants it done right, and wants contractors to pay their laborers properly!

My cousin is a contractor and told me about a project he did for a school district—he construction-19696_960_720needed to have both Payment and Performance Bond insurance just to build a single (But pretty expensive) retaining wall for a new school! He was telling me if the project is over a certain amount of money that you have to have these types of coverages, he mentioned that the “Miller Act” is the reason for this and places the threshold at $100,000 for federal projects. I also found out that in Texas the “Little Miller Act” applies to any state project—no matter the cost!

Filed Under: Insurance Tagged With: agent, contractor, coverage, insurance, surety, surety bonds

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4420 N. Mesa St
El Paso, TX 79902

(915) 996-9799
FAX: 1-866-514-3064

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www.florinsurance.com

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