What Is Labour & Material Payment Bond?
A labour and material payment bond guarantees that a contractor will pay its subcontractors, workers, and suppliers on a project. It protects those parties from non-payment and helps keep the project free of liens, and is usually issued alongside a performance bond.
Frequently asked questions
What does a labour and material payment bond cover?
A labour and material payment bond guarantees that the contractor will pay its subcontractors, workers, and suppliers for labour and materials on the project. If the contractor does not pay, eligible claimants can claim against the bond, up to the bond amount.
Who can claim on a labour and material payment bond?
Claimants are generally those with a direct contract with the bonded contractor or one of its subcontractors, such as subtrades, suppliers, and workers. The bond wording sets out who qualifies and the notice deadlines, so claimants should read it early.
Is a labour and material payment bond the same as a performance bond?
No. A performance bond protects the owner if the contractor fails to finish the work, while a labour and material payment bond protects the people who supply labour and materials to the project. On Ontario public contracts of $500,000 or more, the Construction Act requires both.
Questions about Labour & Material Payment Bond?
Our Ontario brokers can explain how it applies to your policy.
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