As one of the UK's leading insurance brokers, our team of specialists has extensive experience in the field of liability insurance.
Performance Bond insurance is a policy issued to Contractors to guarantee against the failure of the other party to meet obligations specified in a contract. It is designed to protect the main contractor if the sub contractor fails to construct according to the specifications in the contract, the project/property owner is guaranteed compensation for any monetary loss.
Payment from the performance bond is available only to the project/property owner. No one else can make claims against it. In order for a performance bond to be effective, the contract must be specific about the work to be done. A contractor cannot be held accountable for vague descriptions that are open to interpretation.
The Bond will generally be as a percentage of a contract value and as an indemnity to the main contractor at the sub contractors own expense.
An example of where a Performance bond may be required: A contractor may issue a bond to a client for whom a building is being constructed. If the contractor fails to construct the building according to the specifications laid out by the contract, the client is guaranteed compensation for any monetary loss.
We are able to offer terms from a British Insurance Brokers Association Approved Facility along with other leading insurers. To discuss in more detail or for more information please contact our specialist.
On demand bonds are a requirement for international construction contracts and are not normally used in the UK construction industry.
As well as being used in the international contracts they are a requirement in the power and petroleum industries in the UK. Banks are normally the ones to provide these industries with the bond.
On the other hand, conditional bonds are popular within the UK construction industry and are normally given by insurance companies. This means that the overall payment is dependent on the employer and varies from employer to employer due to the potential loss of various amounts of money. Before any payment can be paid, litigation may be required.
The value of the bond is determined by the value of the contractors or employers contract value. This is because the bond is normally valued at 10% of the overall contract value.
The bond will be called up when the contractor is no longer able to perform to the level of the contract due to them becoming insolvent. The bond is paid to provide the contractor with the money they require to be financially stable and able to see out the contract at a satisfactory level.
To be able to provide the contractor the necessary amount of money in the bond, they will require a lot of financial information from the contractor. This includes analysing their balance sheets, current debtors and bank arrangements.
A surety is a person who takes full responsibility of another person’s performance of an undertaking.
Even though a conditional bond is given by an insurance company it is not like normal insurance. This is because a Surety will need to recover its outlay if a bond is needed. Because of this, directors of a company will need to sign a company indemnity form. This is to confirm that the company will pay back the surety.
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