Subcontractor default insurance (SDI)
In the United States, subcontractor default insurance (SDI), commonly known by its popular brand name Subguard, is a safeguarding tool for contractors to mitigate the risk of their subcontractors defaulting.
Rather than being a guarantee like a surety bond, it is an insurance product. A surety bond is an agreement between three parties – the contractor, subcontractor and surety. The performance of the subcontractor is guaranteed by the surety. By contrast, SDI is an agreement between the contractor and insurer.
Rather than providing a guarantee of performance or payment, the insurer commits to reimbursing the contractor for costs relating to default of a subcontractor or supplier. This is usually a high-deductible dollar amount, which means that the contractor must absorb some costs in rectifying the default, but the exact amount is negotiable.
The insurer can also replace the performance bonds of subcontractors by providing the contractor with additional cover against default losses. However, it does not act as a substitute for a payment bond, meaning that if the contractor defaults on payment to the subcontractor or becomes insolvent, the subcontractor is not covered by the policy.
SDI can be advantageous over a normal default process by avoiding litigation and delays that can impact on the project schedule.
[edit] Related articles on Designing Buildings Wiki
- Advance payment bond.
- Bonds.
- Contractors’ all-risk insurance.
- Contract works insurance.
- Insurance.
- Legal indemnities.
- Liens.
- Mechanic’s lien.
- Performance bond.
- Retainage.
- Sub-contractor.
- Surety.
- Warranty.
[edit] External references
Featured articles and news
Twas the site before Christmas...
A rhyme for the industry and a thankyou to our supporters.
Plumbing and heating systems in schools
New apprentice pay rates coming into effect in the new year
Addressing the impact of recent national minimum wage changes.
EBSSA support for the new industry competence structure
The Engineering and Building Services Skills Authority, in working group 2.
Notes from BSRIA Sustainable Futures briefing
From carbon down to the all important customer: Redefining Retrofit for Net Zero Living.
Principal Designer: A New Opportunity for Architects
ACA launches a Principal Designer Register for architects.
A new government plan for housing and nature recovery
Exploring a new housing and infrastructure nature recovery framework.
Leveraging technology to enhance prospects for students
A case study on the significance of the Autodesk Revit certification.
Fundamental Review of Building Regulations Guidance
Announced during commons debate on the Grenfell Inquiry Phase 2 report.
CIAT responds to the updated National Planning Policy Framework
With key changes in the revised NPPF outlined.
Councils and communities highlighted for delivery of common-sense housing in planning overhaul
As government follows up with mandatory housing targets.
CIOB photographic competition final images revealed
Art of Building produces stunning images for another year.
HSE prosecutes company for putting workers at risk
Roofing company fined and its director sentenced.
Strategic restructure to transform industry competence
EBSSA becomes part of a new industry competence structure.
Major overhaul of planning committees proposed by government
Planning decisions set to be fast-tracked to tackle the housing crisis.
Industry Competence Steering Group restructure
ICSG transitions to the Industry Competence Committee (ICC) under the Building Safety Regulator (BSR).
Principal Contractor Competency Certification Scheme
CIOB PCCCS competence framework for Principal Contractors.
The CIAT Principal Designer register
Issues explained via a series of FAQs.