A Payment Bond is a type of surety bond that guarantees a contractor will pay their subcontractors, laborers, and suppliers for work performed on a construction project. This bond protects those parties from non-payment, ensuring they receive compensation for their contributions. It is often required in public construction projects to safeguard the interests of all involved. When a contractor obtains a payment bond, they pay a premium to a surety company, which underwrites the bond. If the contractor fails to make payments, the surety company is responsible for covering the owed amounts, allowing affected parties to seek compensation without lengthy legal disputes.