Insurance Services > Commercial > Guarantees and Bonds


Many of the larger or more complex building projects or engineering schemes look for financial protection if any of the contractors are unable to fulfil their agreed responsibilities because the business of the contractor fails.


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The extent of that protection varies from one contract to another, but it usually requires the provision of an insurance policy known as a bond or alternatively a guarantee from your bank that they will meet the cost of the agreed financial penalty.

Most banks will charge about 10% to provide the guarantee if you are unable to set aside the full amount of the financial penalty into an earmarked account with them for the entire duration of the contract.

Insurance companies are more flexible, but they will need to study your accounts and the precise nature of the guarantee before a premium could be negotiated to provide the cover that you need. This process naturally takes much longer than approaching your bank, but the savings are usually worthwhile.