Payment Bonds | Essential Protection for Construction Projects | Federal & State Required
Payment bonds guarantee subcontractors and suppliers receive payment on construction projects. Required on federal projects over $150,000 and state projects $25K-$250K. Premiums 0.5%-4% annually with expert construction specialists.
Protect your project stakeholders • Premiums starting at 0.5% annually
✓ Miller Act specialists ✓ All 50 states ✓ SBA guarantee programs ✓ Construction expertise
Last Updated: June 25th, 2025
What is a Construction Payment Bond?
Understanding payment bonds and how they protect subcontractors, suppliers, and laborers on construction projects
This video explains how payment bonds work as essential financial protection, ensuring subcontractors, suppliers, and laborers receive payment for their work even when contractors default.
Get Your Payment Bond QuoteConstruction Payment Bond Process
Payment bonds guarantee subcontractors, suppliers, and laborers receive payment even when general contractors default - essential protection for construction industry participants
- Federal Requirement: Mandatory on government projects over $150,000
- State Requirements: Little Miller Acts require bonds on $25K-$250K projects
- Lien Protection: Prevents mechanics liens on public property
- Financial Security: Protects against contractor insolvency
What Construction Professionals Say About Payment Bonds
Real perspectives from contractors, attorneys, and industry associations
"When others say no, they say yes. When others say it's impossible, they make it possible by going the extra mile. Unique Surety cares about its clients' success."— Kevin, President of S3S Construction
"We changed to Unique Surety after being with a bonding agent for 5 years. Unique Surety arranged for much higher performance bonding limits at a much better rate which opened the door to greatly expanding our business. Without Robin and her staff at Unique Surety we would absolutely not be where we are today."— Kari, Sign and Highway Contractor, Montana
"I've filed countless payment bond claims – in both the public and private sectors. While Mechanic's Liens are the bread-and-butter of private construction projects, payment bonds are designed to secure your rightful payments for government contracts and public projects."— Joe Katz, Construction Law Attorney, 15+ Years Experience
"Public property cannot be liened so without the payment bond, when it comes to public works projects, subcontractors, laborers and suppliers do not have a lot of options for course of action if they aren't paid by the general contractor."— Commercial Surety Bonding Association
Essential Construction Project Protection
Payment bonds serve as critical financial safety nets, guaranteeing subcontractors, suppliers, and laborers receive payment for their work
Payment bonds operate as financial guarantees within a three-party structure between contractors, project owners, and surety companies. Unlike insurance policies where claims are expected losses, surety companies underwrite payment bonds expecting zero claims, as contractors must reimburse any amounts paid out. The coverage typically equals 100% of the contract value, protecting subcontractors and suppliers when general contractors default on payments.
Key Protection: With the U.S. surety market reaching $9.5 billion in 2023 and growing at 15.7% annually, payment bonds have become indispensable tools for protecting construction industry participants from contractor defaults.
Federal & State Requirements
| Project Type | Threshold | Coverage |
|---|---|---|
| Federal Miller Act | $150,000 | 100% |
| SBA Guarantee Program | Up to $14M | 80-90% |
| Davis-Bacon Projects | $2,000+ | 100% |
| State | Threshold | Coverage |
|---|---|---|
| Texas | $25,000 | 100% |
| California | $25,000 | 100% |
| Florida | $100,000 | 100% |
| New York | $100,000 | 100% |
| Illinois | $50,000 | 100% |
| Alabama | Varies | 50% |
Important: SBA Record Performance in 2024
The SBA Surety Bond Guarantee Program achieved record performance in fiscal year 2024, guaranteeing $9.2 billion in contract value and supporting over 2,000 small businesses.
- • Contract limits increased to $14 million for federal contracts
- • QuickApp program available for contracts up to $500,000
- • Premium rates as low as 0.6% of contract price
Protected Parties Include:
Market Performance Metrics
Direct Written Premiums: $9.50 billion in 2023 (15.7% growth)
Global Surety Market: $21.24 billion in 2024, projected $34.89 billion by 2033
Industry Loss Ratio: 22.2% in 2023 - demonstrating strong claim management
Successful Recovery Cases
Massachusetts Case: Subcontractor recovered nearly $2.6 million from surety despite original contract limit of only $568,000
Court ruled quantum meruit damages against sureties can exceed expectation damages
Federal Project: Electrical subcontractor filed $2.9 million claim for additional labor costs
Demonstrates protection against various payment disputes beyond simple non-payment
Payment Bond
- • Protects: Subcontractors, suppliers, laborers
- • Guarantees: Payment for work performed
- • Claims from: Unpaid subcontractors and suppliers
- • Timeline: 90 days to 2 years for filing claims
- • Coverage: 100% of contract amount (50% in Alabama)
- • Purpose: Prevent mechanics liens on public property
Performance Bond
- • Protects: Project owners
- • Guarantees: Project completion per contract terms
- • Claims from: Project delays, defects, non-completion
- • Response: Surety finds replacement contractor
- • Coverage: 100% of contract amount typically
- • Purpose: Ensure project completion and quality
Why Both Bonds Are Required Together
Both bonds are typically required together on public projects in a "buy-one-get-one-free" structure that provides complete risk coverage without additional premium for the second bond.
The U.S. Small Business Administration maintains an official directory of authorized surety bond agencies across all 50 states. These agencies can help with various bond types including payment bonds, performance bonds, contractor bonds, and other professional surety bonds.
"The Infrastructure Investment and Jobs Act's $1.2 trillion allocation, with $850 billion specifically for bonded projects, drives unprecedented demand for payment bonds across roads, bridges, transit systems, and energy infrastructure projects."— Industry Market Analysis 2024
Get Your Construction Payment Bond Today
Miller Act Compliance & Construction Expertise
Federal & State Requirements:
- • Federal Miller Act: $150,000+ government projects
- • State Requirements: $25K-$250K thresholds vary by state
- • SBA Programs: Up to $14M federal contracts with guarantees
- • Private Projects: Owner discretion for lien protection
Our Construction Bond Services:
- ✅ Miller Act Specialists Available 24/7
- 📱 Construction Industry Expertise
- ⬇️ Fast Processing for Bid Deadlines
- 🎯 All 50 States Plus Federal Projects
- 💰 Competitive Rates 0.5%-4% Annually
Construction Bond Solutions:
⚡ Federal Miller Act Bonds
- Government projects $150,000+
- 100% contract coverage required
- First and second-tier protection
- Expert compliance guidance
📋 State Project Bonds
- Little Miller Act compliance
- State-specific requirements
- Threshold guidance $25K-$250K
- Local project expertise
🎓 SBA Guarantee Programs
- Up to $14M federal contracts
- Small business support
- Competitive rates with guarantees
- QuickApp processing available
Construction Payment Bond Specialists | Miller Act Compliance | Federal & State Projects | SBA Programs