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 these parties from non-payment, ensuring they receive compensation for their contributions. In the event that the contractor fails to make payments, the surety company that issued the bond is responsible for covering the owed amounts. This arrangement helps maintain trust and financial stability within the construction industry, allowing projects to proceed smoothly without payment disputes.