Reduce Your Liability with Performance and Payment Bonds

Performance and payment bonds are an essential part of some contractual agreements, especially for large projects. They protect the stakeholders of the project in the event of failure to complete for various reasons. The obligee of the performance bond is the project owner and the obligee of the payment bond is the collective of labourers, sub-contractors and suppliers hired under the contract. In case a contractor fails to hold up to his or her end of the contract and the project is a failure or incomplete, the project owner can file a claim against the performance bond for compensation. Similarly, if the labourers, sub-contractors and suppliers do not get their dues from the contractor, they can file a claim against the payment bond.

Who is the Guarantor?

The guarantors of payment and performance bonds are usually insurance companies or banking establishments. Approval for payment and performance bonds is a long process as a lot of cross-checking and reviews are done before the guarantors gives the green signal.

Costs of Performance Bonds

Performance bonds generally come at the rate of 3% for bonds less than $250,000. Majority of bonds will cost between 0.75% and 3%. It is important to note that the underwriting process for a performance bond application will take into consideration the credit history of the applicant. Bad credit history is perceived by bond companies as a higher risk and hence the payments are also going to be higher.

Difference between Performance Bond and Payment Bond

A question asked often is – What is the difference between a payment bond and performance bond? A payment bond is a bond ensuring that sub-contractors, labourers and suppliers that are part of a project will receive their due payments from the contractor. A performance bond on the other hand is provided to ensure that the contractor completes the project. Payment bonds are often a pre-requisite along with performance bonds.

Ensure Compliance at all Levels

Sometimes a payment bond dispute can arise when an employee or laborer not directly transacting with the contractor files a complaint. Therefore it is important that contractors ensure that the sub-contractor and related levels also have payment bonds in place to take out the possibility of such a scenario.

Payment and performance bonds offer protection to a large number of stakeholders and hence are indispensable. Learn more by downloading sample bond forms.

Choose the Experts for Best Deals

When you align yourself with a reputed bond company you will have the advantage of reaching out to a large network of guarantors. You can have all your queries and concerns addressed by the bond provider. Enjoy low quotations and have your case presented by experts to bond providers in the best possible way. The bond business is very focused on mitigating risks, so an application that does not present an individual in a great light might result in high quotations.

The top bond facilitators enjoy a great relationship with bond companies built on years or trust and business relationships. Save on your performance bond costs by applying with the help of the experts. Get the best quotations.

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