Which bond is designed to protect the owner if the contractor fails to perform?

• A. Bid bond
• B. Performance bond
• C. Business bond
• D. Insurance bond

Answer: (B)

In construction, the bond that protects the owner if the contractor fails to perform is a performance bond. This type of surety bond guarantees that the contractor will complete the work according to the contract terms. If the contractor defaults, the owner can file a claim with the surety, and the surety will either arrange for another contractor to finish the work or compensate the owner up to the bond amount. This shifts the risk of non-performance from the owner to the surety, ensuring the project isn’t left incomplete or unduly delayed.

A bid bond relates to the bidding phase and ensures the bidder will enter into the contract and provide the required bonds if awarded; a payment bond ensures subcontractors and suppliers are paid, protecting them rather than the project owner against performance failures; an “insurance bond” isn’t a standard term used for protecting project performance.