7 Reasons to Use Surety Bonds Over Subcontractor Default Insurance

Construct - Surety BondsAre you unsure whether to accept subcontractor default insurance (SDI) in place of surety bonds on your projects?  While there are some situations when SDI would be satisfactory, project owners need to be familiar with the specifics of the coverage to ensure they are adequately protecting their investment.  In many cases, a surety bond is the smarter choice as it provides more protection and less risk directly to general contractors. Here are seven benefits that make surety bonds more valuable than SDI:

  1. Extensive and ongoing prequalification is done by a knowledgeable third party
  2. Regulated by state insurance departments
  3. Complete risk transfer from general contractor to surety
  4. Full payment protection for subcontractors and suppliers
  5. Surety pays losses after independent investigation
  6. Bonds cannot be cancelled
  7. Subcontractor is incented to perform by its indemnification obligation to the surety

Owners must be attentive in questioning the cost of such policies and what protection is offered, to whom, and under what conditions.  This convenient educational tool can be beneficial and useful to further explain the difference between SDI and surety bonds.  The AssuredPartners NL team of surety experts have the knowledge and tools to help navigate the requirements and determine the best risk solution for your company.  To learn more, visit AssuredPartners NL Construction.

Source: National Association of Surety Bond Producers

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