What is a Payment Bond?
A payment bond is a form of insurance that falls under the “contract bond” category. Payment bonds ensure that subcontractors and other hired workers will be paid if the contractor falls through on a project. It also guarantees payments to any suppliers for a project. The bond will reimburse these people should there be any illegal or unethical activities on the part of the contractor. Many times this bond is paired with performance bonds.
Before contractors purchase a bond from an agency, they must submit themselves to a credit check, have their application approved, and go through other screening processes.