Performance Bonds for Colorado Contractors
A performance bond is a surety bond (a written guaranty) from a third party (usually a surety company or insurance company) submitted to a principal (client or customer) by a contractor upon winning the bid. A performance bond ensures payment of a sum (not exceeding a stated maximum) of money in case the contractor fails in the full performance of the contract.
Performance bonds usually cover 100 percent of the contract price and replace the bid bond on award of the contract. Unlike a fidelity bond, a performance bond is not an insurance policy and (if cashed by the principal) the payment amount is recovered by the guarantor from the contractor. Also called standby letter of credit, contract performance bond.
For example, a contractor may need a performance bond when constructing a new building. If the contractor fails to complete the building per the specifications in the contract, the client is protected from monetary loss up to the amount of the performance bond.
Performance bonds are generally issued as part of a Performance and Payment Bond – the payment bond will guarantee that the contractor will pay the associated labor and material costs.
Reeder Bonds offers bid bonds, performance bonds and payment bonds for all sizes of construction projects in the state of Colorado. Contact us for low surety bond prices and great customer service!