What a payment bond does
A payment bond (also called a labor and material bond) guarantees that the subcontractors, laborers, and suppliers on a project are paid. On public projects, those parties cannot file a mechanics lien against public property, so the payment bond is their security. It is almost always issued alongside a performance bond.
When you need one
Payment bonds are required on most California public works contracts above a statutory threshold and are frequently required on larger private jobs. If your contract calls for a performance bond, it almost certainly calls for a payment bond too.
What it costs
When written with the performance bond, the payment bond is generally covered by the same combined premium, a percentage of the contract amount set by underwriting. We quote the pair together for your specific project.