A payment bond is a type of surety bond that guarantees a contractor will pay their subcontractors, laborers, and suppliers for work completed 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 costs. This provides financial security and encourages trust among all parties involved in the project, including the contractor, subcontractors, and suppliers.