Performance Bonds for Texas Contractors
A performance bond can provide a project owner with financial assurance that a contractor will perform the work according to the bonded contract, subject to the terms and conditions of the bond.
Lavon Insurance helps Texas contractors apply for performance bonds for public, commercial and qualifying private construction projects.
What Is a Performance Bond?
A performance bond is a type of surety bond commonly associated with construction and other contractual obligations.
A project owner may require a contractor to provide a performance bond after the contractor is awarded a project. The bond is designed to provide financial protection to the obligee if the contractor fails to satisfy covered performance obligations under the bonded contract.
The actual responsibilities of the contractor, surety and project owner are determined by the bond form, construction contract and applicable terms.
Because requirements vary from project to project, contractors should review the contract documents carefully before applying.
The Three Parties to a Performance Bond
Principal
The contractor responsible for performing the work required by the bonded contract.
Obligee
The project owner, governmental entity or other party requiring the performance bond.
Surety
The surety company that issues the bond and provides the financial guarantee according to the bond terms.
What Does a Performance Bond Help Protect?
Contract Performance
The bond is generally tied to the contractor’s obligation to perform covered work according to the bonded contract.
Project Owner
The obligee receives the benefit of the financial guarantee provided by the surety, subject to the bond’s terms.
Contractual Requirements
Providing the required bond can allow a contractor to satisfy a bonding condition contained in a construction contract or project award.
Performance Bonds Are Not Limited to Large Government Projects
Performance bonds are commonly associated with public works and larger commercial construction projects, but they may also be requested on private construction contracts.
Private developers, general contractors, property owners and other contracting parties can require a performance bond as part of their agreement with a contractor.
Whether a bond is required depends on the contract and the party requesting the financial assurance.
Performance Bonds Can Also Add Confidence to Smaller Projects
Performance bonds are not only relevant to multimillion-dollar construction contracts.
On certain private projects—including substantial home renovations, additions or remodeling work—a homeowner may ask a contractor to provide additional financial assurance that the contractual work will be completed.
Even when a performance bond is not legally required, a contractor who is willing and able to obtain one may demonstrate a more formal approach to contracting and provide an additional level of reassurance to a prospective customer.
Why a Customer May Value a Bond
- Provides an additional financial guarantee tied to the contract
- Shows that the contractor is willing to undergo surety underwriting
- Can help differentiate a contractor during competitive proposals
- May increase customer confidence on larger renovation projects
- Creates a more formal framework around the contractor’s obligations
Bid Bonds, Performance Bonds & Payment Bonds
These bonds may be used at different stages of the construction contracting process.
Bid Bond
Used during the bidding process and generally associated with the bidder’s obligations if the project is awarded.
Performance Bond
Generally used after contract award to provide a financial guarantee relating to covered performance obligations.
Payment Bond
May provide protection relating to qualifying payment obligations owed to subcontractors, laborers or suppliers.
Who May Need a Performance Bond?
General Contractors
Contractors awarded commercial, municipal, institutional or other bonded construction projects.
Specialty Contractors
Electrical, mechanical, plumbing, concrete, excavation and other specialty contractors may encounter performance bond requirements.
Residential Contractors
Contractors performing larger private residential renovations or additions may encounter customers or contracts that request additional performance assurance.
How to Apply for a Performance Bond
Review the Contract
Identify the obligee, contract amount, required bond amount and required bond form.
Apply
Provide the requested information about the contractor, project and business.
Underwriting
The surety evaluates the contractor, project and financial information required for the bond.
Receive the Bond
Once approved and issued, provide the performance bond to the obligee according to the contract requirements.
Information You May Need
- Legal business name and contact information
- Project owner or obligee
- Project name and location
- Contract amount
- Required performance bond amount
- Copy of the contract or award documents
- Required bond form
- Description and scope of work
- Contractor experience
- Current work in progress
- Financial information when required
Performance Bond Assistance for Texas Contractors
Lavon Insurance helps contractors and businesses obtain contract surety and other bond solutions throughout Texas.
Online Application
Start your performance bond application online through our surety bond platform.
Personal Assistance
Contact Lavon Insurance if you need help identifying the bond information requested by your contract.
Contractor Bonding
We can assist with performance bonds, bid bonds and other available surety needs, subject to underwriting.
Performance Bond FAQs
What is a performance bond?
Is a performance bond the same as insurance?
Is a performance bond the same as a bid bond?
Can a homeowner require a contractor to obtain a performance bond?
Can a performance bond help a contractor build customer trust?
Does every construction project require a performance bond?
How much does a performance bond cost?
Can I apply for a performance bond online?
Start Your Performance Bond Application
Whether you are working on a public project, commercial construction contract or qualifying private project, Lavon Insurance can help you start the performance bond application process.
Bond availability, approval, rates, limits and underwriting requirements vary by surety company, contractor and project. A performance bond is not issued until approved by the surety.