Subcontractor default insurance is a useful product on the market to general contractors that work on large projects. Subcontractor default insurance is an alternative to requiring subcontractors to obtain performance bonds. Not all subcontractors can be bonded whereas general contractors can enroll subcontractors in their subcontractor default insurance program based on the general contractor’s risk assessment and prequalification protocols. However, there is a huge difference between subcontractor default insurance and performance bonds. Subcontractor default insurance is really a tool designed to remedy substantial (from a monetary perspective) subcontractor defaults since it is not designed to cover every dollar caused by a subcontractor default. A performance bond, on the other hand, assuming rights are properly preserved under the bond, is designed to cover every dollar caused by a subcontractor default.
For more information on the nuts and bolts of subcontractor default insurance, check out this article.
Also, check out this presentation I have given regarding subcontractor default insurance.
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