What Is Performance Bond?
A performance bond guarantees that a contractor will complete a project according to the contract. If the contractor defaults, the surety steps in to see the work finished or compensates the owner, up to the bond amount (often a large percentage of the contract value).
Performance bonds protect owners from the cost and delay of a contractor failing mid-project. They are typically issued together with a labour & material payment bond, and follow the bid bond once a contract is awarded.
Frequently asked questions
What does a performance bond guarantee?
A performance bond guarantees that the contractor will complete the work according to the contract. If the contractor defaults, the surety arranges completion or compensates the owner, up to the bond amount.
Are performance bonds required in Ontario?
Ontario's Construction Act requires a performance bond and a labour and material payment bond, each covering at least 50% of the contract price, on public contracts of $500,000 or more. Many private owners also require them on larger projects.
Is a performance bond the same as insurance?
No. A performance bond protects the project owner, not the contractor, and if the surety pays a claim the contractor must repay it under its indemnity agreement. That is why surety underwriting focuses on the contractor's finances, experience, and capacity.
Questions about Performance Bond?
Our Ontario brokers can explain how it applies to your policy.
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