What is a Performance Bond?
Performance bonds are very common in the commercial construction industry and function as a safety net for project owners and developers that the contractors they hire will successfully complete their work on time and within the proposed budget.
Performance Bonds are legal agreements between 3 parties:
Click below to go to our innovative bond portal. You can quote, bind, and issue a bond in less than 5 minutes! Note that some types of bonds and higher bond amounts aren't eligible for online instant issue and will require additional underwriting.
Performance Bonds are legal agreements between 3 parties:
- Obligee (Project Owner or Real Estate Developer)
- Principal (Contractor hired to do work)
- Surety (The Company Issuing the bond)
Click below to go to our innovative bond portal. You can quote, bind, and issue a bond in less than 5 minutes! Note that some types of bonds and higher bond amounts aren't eligible for online instant issue and will require additional underwriting.
How Performance Bonds Work:
When a contractor (Principal) wins a bid on a new job (which requires a bid bond), the contractor then has to acquire a performance bond (from a Surety) to reassure the project owner (Obligee) that you will follow through with your bid and complete the project as promised. If the contractor fails to follow through and honor the contract, the project owner can file a claim on the bond to provide liquidity to finish the incomplete job. The surety will then recover the lost money from the contractor.
What does a Performance Bond Cost?
Performance Bonds are typically anywhere from 1% to 3% of the contact's value. For example, a $100,000 contract that requires a performance bond will usually cost $1,000 to $3,000 in premiums.
Factors that play a role in the cost of a performance bond include credit history, work experience, personal and corporate financials, as well as the type of work to be completed.
Performance Bonds are often combined with a payment bond that ensures a contractor pays subcontractors and suppliers as agreed upon.
Click below to go to our innovative bond portal. You can quote, bind, and issue a bond in less than 5 minutes! Note that some types of bonds and higher bond amounts aren't eligible for online instant issue and will require additional underwriting.
Factors that play a role in the cost of a performance bond include credit history, work experience, personal and corporate financials, as well as the type of work to be completed.
Performance Bonds are often combined with a payment bond that ensures a contractor pays subcontractors and suppliers as agreed upon.
Click below to go to our innovative bond portal. You can quote, bind, and issue a bond in less than 5 minutes! Note that some types of bonds and higher bond amounts aren't eligible for online instant issue and will require additional underwriting.