Performance bond
Guarantees you will complete a contract according to its terms — commonly required on public works and larger private projects.
What it is
A performance bond guarantees that you will complete a construction or service contract according to its terms. If you default, the obligee can make a claim, and the surety arranges for completion or pays covered damages up to the bond amount — which you then reimburse. It is commonly paired with a payment bond on public projects.
Who requires it
- •Public project owners — Federal, state, and local public works projects over a threshold generally require performance (and payment) bonds.
- •Private owners and GCs — Private owners and general contractors often require performance bonds from contractors and key subs on larger jobs.
What drives the price
- •Contract / bond amount — Premium is a percentage of the bonded contract value, so larger contracts cost more.
- •Your financials and experience — Performance bonds are underwritten on your financial strength, credit, and track record on similar work.
- •Project type and term — The complexity and length of the project factor into the rate.
How surety bonds work
A surety bond is a three-party agreement between you (the principal), the government agency or party requiring it (the obligee), and the surety company that backs it. It is not insurance for you — it protects the obligee and the public. If a valid claim is paid on your bond, you are responsible for reimbursing the surety. Premium is a small percentage of the bond amount and is driven mostly by the required bond amount and the applicant’s credit.
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Quote & buy at SuretyBondly →Frequently asked questions
What is the difference between a performance bond and a payment bond?
A performance bond guarantees you complete the work; a payment bond guarantees your subcontractors and suppliers get paid. Public projects typically require both.
How are performance bonds underwritten?
They are underwritten on your financial statements, credit, and experience — larger or more complex bonds require more documentation than a simple license bond.
Is a performance bond insurance?
No. If a claim is paid, you reimburse the surety. It protects the project owner, not you.
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