What is a Payment Bond?
You may have just been awarded a contract through a bid or by negotiating directly with the owner on a price for a job. At this stage they may ask you for a Payment Bond. You may ask yourself what is a Payment Bond? It is actually very simple. It is a guarantee from a third party (The Surety Company) to the owner of the project (The Obligee) that if you fail to pay any sub-contractors or suppliers the provided materials or supplies to the project. This protects the Obligee from any liens that may be placed on the project. The sub-contractor or supplier will send notice to the Surety Company and you will be contacted by Surety Company to resolve the matter. If you can not, and the Surety deems the claim to be valid they will pay the amount demanded.
A bond is different than insurance in a number of ways, but the most important difference is that unlike insurance when a claim is paid, the Surety company will attempt to collect any money paid out on the bond from you. With insurance, there is no attempt to collect monies paid out on your behalf for claims.
Please fill out the form for your Payment Bonds Quote.
Or if you wish to talk with the expert right away, please call 312-878-2372.
How Much Do Payment Bonds Cost?
The price of a Payment Bond is a percentage of the total contract price. Larger contracts the price is usually around 2%. Smaller contracts with minimal underwriting, no financial statements and no lengthy application forms are around 3% of the contract price. Always remember to add this in the cost of your bid. It is also good to remember that if the original bid made no mention of a bond requirement, the Owner of the project should pay for the cost of the bond and not you. So they will need to adjust the contract price.
Another thing is that Payment bonds 99% of the time also require you to provide a Performance bond. These bonds are issued together at no additional cost.
Your performance and payment bond cost should be included in your bid, making it so you do not pay for your bond, the owner does.
If you want to see if you qualify and determine your payment and performance bond cost, you need to fill out our online performance bond quote application.
In our years of service to contractors we have established bonding programs to address a wide array of situations. At FarmerBrown.com we understand that companies have unique bonding needs. Our bond programs are designed to make what can be a complex situation hassle-free by using our years of experience to guide you through the process.
By selecting the best bonds from the nation’s top insurance carriers FarmerBrown.com is able to deliver coverage that represents the greatest value for you. You can obtain an ONLINE QUOTE, or call 312-878-2372 today to find out more about the extensive bonding programs offered by FarmerBrown.com to reduce premium cost and risk. Let the FarmerBrown.com team get you your Payment Bonds trouble-free.
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