What does a performance bond protect against?

A performance bond is a type of surety bond that provides a guarantee that a contractor will fulfill their obligations as specified in the contract. If the contractor fails to complete the work as agreed, the performance bond ensures that the project will be completed, often by hiring another contractor, or that funds will be available to address the issues. This means that it specifically protects against the risk of incomplete work by the contractor.

In the context of construction projects, performance bonds serve as a financial safety net for project owners, ensuring that they are not left facing uncompleted projects. When a contractor does not meet their contractual obligations, the owner can invoke the bond to seek compensation for damages associated with the incomplete work. This guarantees that the project will be finished in accordance with the specifications laid out in the contract, thereby safeguarding the owner's investment in the project.

The other options refer to different types of risks or issues that may be covered by other forms of insurance or guarantees but do not specifically relate to what a performance bond addresses. For example, protecting against financial loss from subcontractor failure pertains more to various types of liability or indemnity arrangements. Similarly, the contractor's inability to repair damages or unexpected costs due to customer complaints would typically involve different forms of insurance policies