Payment Bond

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A Financial Guarantee

Payment Bonds are also known as a Labor and Material Bond, a payment bond guarantees that the contractor will fulfill all financial obligations (material, labor, subcontract, etc.) relating to the contract. If the contractor fails to pay subcontractors and suppliers for their work, the payment bond amount may be used as reimbursement to these parties.

Skyscraper under construction

The payment bond forms a three-way contract between the owner, the contractor and the surety, to make sure that all subcontractors, laborers, and material suppliers will be paid leaving the project lien free.

major construction site in downtown

What is a Payment Bond?

Payment bonds are surety bonds that ensure subcontractors and material suppliers are paid according to contract. These bonds are critical for jobs on public property where mechanic’s liens (security interests) cannot be used.