What guarantees that the surety will complete the contract or provide sufficient funds if the contractor defaults?

The performance bond is a contractual agreement between a surety company and the principal (the contractor) which guarantees that the contractor will complete the project according to the terms of the contract. If the contractor fails to meet the contractual obligations or defaults, the surety is responsible for either ensuring the completion of the project or providing the financial means to cover the costs necessary to complete the work. This type of bond offers protection to the project owner, ensuring that they are not left financially liable for a contractor's failure to perform the work as specified.

Other options serve different purposes. A certificate of insurance verifies that the contractor has the necessary insurance coverage, a payment bond guarantees that the contractor will pay their subcontractors and suppliers, and a bid bond provides assurance that a contractor will enter into a contract if selected through the bidding process. However, none of these guarantee contract completion in the same way that a performance bond does.