This insurance guarantees the due performance of the contract by the contractor in accordance with the terms and conditions set out in the contract.
Owners of projects, private companies or government bodies, usually require performance bonds from their contractors to protect themselves from the enormous cost of contractor failure. The project owner cannot afford to take the risk in awarding a project to a contractor whose responsibility is uncertain or who may go into liquidation halfway through the job.
What can be covered?
The performance bond requirement is usually 5% – 10% of the contract value