Bonds and insurance guarantees
What are Bonds and Insurance Guarantees?
Bonds are not actually a form of insurance but are closely related and sometimes referred to as bonds insurance. Bonds are commonly taken by construction companies as a requirement of their contract or as part of their tender. Bonds are also used as guarantees by suppliers and tenants.
Bonds are available from some banks, but they generally come at the expense of your overdraft, restricting cash flow and working capital, so getting them from a broker can be advantageous.
What should my bonds and insurance guarantees cover?
Many policies can be extended to include a range of benefits such as:
Payment of fines & penalties
Payment of ransoms & extortion
Cover for lost or disrupted income
Cover for physical injury/damage
The cost of phone hacks
Cost of notifying your contacts
Incidents at your outsourced service providers
Social media risks
What types of bonds are there?
There are various kinds of bonds available, most of which are designed to give a financial guarantee that an agreement will be fulfilled or a financial penalty paid. At Sutcliffe & Co, the most common types of bond we see are:
Performance Bonds
These secure the performance of a contract or contractual obligation, normally covering 10% of the contract value.
Advance Payment Bonds / Guarantee Insurance (construction insurance)
Sometimes referred to as construction bond insurance, these guarantee to an employer that, in the event of a breach of contract by the contractor, payment made before the contract commenced can be recovered under the bond, less any amounts certified under the contract.
Retention Bonds
These allow the employer to release retained monies held under a contract to the contractor to help with the contractor’s cash flow.
Tenant Default Guarantees
This can be used to reassure landlords that their tenants will not default on their rent; it will also give tenants an alternative to a large rent deposit on a property.
What would you like to do?
Request a quote
Make a claim
Contact us
Latest news & resources
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