Which bond type guarantees that labor and material bills will be paid?

The correct answer is the payment bond, which specifically guarantees that all labor and material costs associated with a construction project will be paid. This type of bond provides assurance to subcontractors and suppliers that they will receive payment for the work and materials they provide, thus protecting their financial interests. When a contractor takes on a project and requires financing or contracts with various suppliers and subcontractors, a payment bond ensures that these parties will be compensated, reducing the risk of non-payment and promoting confidence in the project’s financial arrangements.

In contrast, other types of bonds serve different purposes. The surety bond establishes a guarantee that the contractor will fulfill their contractual obligations, but it does not necessarily ensure payment for labor and materials. The performance bond ensures that the work will be completed according to the contract, which might indirectly affect payment as the project is carried out per specifications. The credit bond, on the other hand, typically relates to lending agreements and does not revolve around labor and material costs in a construction context. Thus, the payment bond stands out as the most relevant option to guarantee the payment of labor and material bills.