Subcontractor Default Insurance Ontario
As the top-class commercial insurance brokerage in Ontario, Contractors Insurance is trusted by hundreds of contractors, tradespeople, and companies to handle their insurance needs. We provide personalized insurance plans for our clients and make sure that they get the reliable coverage they need—without the unnecessary riders.
Subcontractor default insurance is one of the policies we offer.
When a project gets stalled, the costs can be hefty. Subcontractor default insurance is a type of insurance that covers general contractors from losses if subcontractors are unable to fulfill their obligations or meet their contract’s initial requirements. It covers expenses, both indirect and direct costs incurred, and is usually an alternative to performance bonds.
Through the years, we’ve helped numerous clients with their insurance needs, no matter the scale of their business. At Contractors Insurance, you are in good hands!
What Is Subcontractor Default Insurance?
Subcontractor default insurance is a policy that is designed to cover contractors from economic losses that arise when a subcontractor defaults. It is different from a subcontractor surety bond, which is a deal contractors make with the subcontractor plus a surety bond company. With a subcontractor surety bond, contractors will have to wait for the surety company to make an investigation if the subcontractor breached their contract.
For subcontractor default insurance, the contractor can decide if the subcontractor breached their contract. This also means that contractors will be held responsible for finishing construction projects, and the insurance provider will simply hand out the agreed amount of money. Under a subcontractor surety bond, on the other hand, the surety company will take over the responsibility for the project until it’s finished.
Subcontractor default insurance is a good way to protect your reputation as a general contractor. Here’s how it works:
- The contractor will take out a subcontractor default policy. Then, it will negotiate with its insurance provider to set coverage limits, premiums, and deductibles.
- The contractor will qualify subcontractors to whom the insurance applies.
- After that, if the qualified subcontractor breaches the contract, the contractor can make a claim to recoup the losses incurred.
As mentioned, the types of claims you can make from this policy will depend on what you, as the contractor, will deem as a subcontractor’s breach of contract.
However, there are other forms of insurance that every construction manager needs to protect themselves against the following instances:
Working at different construction sites can expose you and your subcontractors to accidents—even simple incidents can lead to serious injuries and cause delays for your project. Not to mention, claims from these cases can lead to huge financial losses. If such a case happens, general liability insurance can cover legal or medical fees related to the accident.
Theft or Vandalism to the Construction Site and Its Materials
Construction sites often have expensive materials/fixtures stored away for convenience. At the same time, it also saves the staff time and effort going from one place to another to gather the materials. However, this makes them prone to theft and vandalism.
Moreover, the building or property under construction is also susceptible to damage from natural disasters (such as fire, hurricanes, and hail) or vandalism. Builder’s risk insurance covers losses incurred for construction projects on job sites.
Damaged or Stolen Tools and Equipment
Contractors will often leave specialized equipment or heavier, high-power tools on project sites overnight or for longer periods. Unattended tools and equipment are vulnerable to thieves or susceptible to vandalism, often resulting in damaged materials. Tools and equipment insurance will cover financial liabilities borne out of these incidents and help pay for the replacement or repair of lost, stolen, or damaged items.
Who Can Benefit From Subcontractor Default Insurance Coverage?
Subcontractor default insurance will benefit you if:
- You’re a contractor involved in larger and costlier projects, and therefore need to employ subcontractors;
- You want to mitigate delays and inefficiencies while working on construction sites;
- You want to be protected in case one or more of your subcontractors defaults; and
- You want a higher limit on your policy, since subcontractors default insurance includes coverage for indirect expenses.
The above qualifiers provide an idea regarding the potential hazards surrounding the employment of subcontractors, which can lead to costly legal fees.
We’ve helped numerous clients work out their personalized subcontractors default insurance policies. If you are still unsure about certain aspects of this policy and would like to know more about this insurance type, we’re here to assist you!
Why Ontario Contractors Need Subcontractors Default Insurance
Construction sites are exposed to various risks—both internally and externally. Delays in a project not only cost a lot of money but can also expose your business to a client lawsuit and bring down your reputation as a professional.
Subcontractors Claims Examples
General contractors must undertake their own subcontractor pre-qualifications, which requires evaluating the finances and track records of hundreds of subcontractors.
An electrical contractor defaults in the middle of a project. The contract costs $100,000.
The delays caused by the default could rise to a million if not handled immediately. The maximum payment via a surety bond would be the value of the contract, which is $100,000.
But with subcontractors default insurance, which is an insurance product, a loss limit is purchased. The bigger loss, which is still dependent on the loss limit, will be covered by subcontractors default insurance.
Leading Provider Of Subcontractors Default Insurance In Ontario
A big part of how we are able to create and nurture strong client relationships is because of our dedicated, customer-centric approach. To provide the best experience possible to our clients, Contractors Insurance offers the following benefits:
Personalized Insurance Plans
We make sure to meet your needs and work around the unique risks of your business through our personalized insurance plans. With our policies, you can get tailor-fit coverage for your business without the added costs of unnecessary riders.
Utmost Transparency on Coverage and Limitations
Our staff will explain the full extent of your coverage, including its limits and exclusions, without hiding behind unnecessary jargon. With Contractors Insurance, you’ll know your policy like the back of your hand. If something isn’t working for you, we can tweak the insurance plan until you get the perfect one for your needs.
Thorough and Straightforward Insurance Education
We make it a priority to be clear and concise when explaining policies to the clients we serve. When we’re on the same page with our clients, only then can we ensure that we can personalize their insurance needs properly.
Frequently Asked Questions
One of the biggest differences is that surety bonds are a three-party relationship between the contractor, the subcontractor, and a surety company. Subcontractor default insurance involves the insurer and the insured contractor.
Claim submissions can start as soon as a notice is provided to the insurance company. We recommend gathering the necessary information as soon as possible to avoid further delays in making your claim.
Ready To Get The Coverage You Need?
Contractors Insurance is an Ontario-based, award-winning insurance brokerage firm. We specialize in providing our clients with customized insurance plans that are tailored to the needs of their businesses.
Protecting your company with subcontractors default insurance will give you peace of mind and the reliable protection you need—so you can focus on steering toward a successful future for your business.
Contact us today or get started with a free quote!