What type of bond ensures that a general contractor will compensate subcontractors for labor and materials?

The correct response to this question is that a Payment Bond ensures that a general contractor compensates subcontractors for labor and materials. Payment Bonds are specifically designed to protect those who supply labor and materials, ensuring that they receive payment when due. This bond gives subcontractors and suppliers confidence in getting paid for their work and materials, which is critical in construction projects.

In contrast, a Performance Bond guarantees that the contractor will complete the project according to the contract terms, but it does not directly address payment to subcontractors. A Bid Bond serves a different purpose; it ensures that a contractor will accept a contract if awarded the bid, not securing payment to subcontractors. A Contract Bond is a general term that may encompass various bonds, including performance and payment bonds, but does not specifically refer to the assurance of payment for subcontractors.

This distinction highlights the vital role of the Payment Bond in the construction industry, specifically regarding the financial security of subcontractors and suppliers engaged in a project.