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A performance bond is a financial guarantee that the terms of a contract will be honored. If one party to a contract cannot complete their obligations, the bond is paid out to the other party to compensate for their damages or costs.
The Miller Act requires contractors on all federal public works contracts with a value of $100,000 or more to get a performance bond guaranteeing their work.
Jobs that require payment and performance bonds go through job or project bidding first. As soon as the job or project is awarded to the winning bidder, payment and performance bonds are provided as a guarantee for the completion of the project.
Performance bonds are common in construction and real estate development. In such situations, an owner or investor may require the developer to assure that contractors or project managers procure performance bonds, in order to guarantee that the value of the work will not be lost in the case of an unforeseen negative event.
Contact TriState Business Insurance for a free consultation and insurance quote. Let us handle protecting your business with an appropriate insurance package so you can spend your time running your business!
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