Which type of bond guarantees a subcontractor's performance?

A performance bond is a type of surety bond that specifically guarantees the satisfactory completion of a subcontractor's work as outlined in the contract. This bond ensures that the subcontractor will fulfill their obligations according to the specifications and terms agreed upon in the contract. If the subcontractor fails to perform as required, the performance bond provides financial protection to the project owner or general contractor by covering the costs of hiring another subcontractor to complete the work, or compensating for any losses incurred due to the subcontractor's non-performance.

Other types of bonds serve different purposes. A payment bond secures that the subcontractor or supplier will be paid for their labor and materials provided on the project but does not guarantee performance. A bid bond is used in the bidding process to ensure that the bid is made in good faith and that the bidder will enter into a contract if awarded. Lastly, while an insurance bond may provide certain protections, it is not specifically designed to guarantee performance in the way a performance bond does. Thus, the correct answer is indeed a performance bond, as it is the bond that directly addresses the execution and completion of a subcontractor's work.