What is the main objective of performance bonds in insurance?

The main objective of performance bonds in insurance is to guarantee contract performance. Performance bonds serve as a financial assurance that a contractor or service provider will fulfill their contractual obligations to a project owner or client. If the contractor fails to complete the project according to the agreed-upon terms, the performance bond provides funding to cover the losses incurred by the project owner, which can include the cost of hiring another contractor to complete the work.

Performance bonds are particularly relevant in construction and service industries, where project completion, adherence to specifications, and timelines are critical. This form of bond helps to instill confidence in both parties involved in a contract, ensuring that the current obligations are met, thus protecting against financial losses related to non-performance.

The other options do not align with the purpose of performance bonds. Health-related expenses, general liability coverage, and property insurance focus on various aspects of risk management and protection against specific types of losses, but they do not address the need for assurance regarding the fulfillment of contractual commitments, which is the specific role of performance bonds.