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
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.
Conservation in the age of the fourth (digital) industrial revolution.
Shaping the future of heritage
Embracing the evolution of economic thinking.
Ministers to unleash biggest building boom in half a century
50 major infrastructure projects, 5 billion for housing and 1.5 million homes.
RIBA Principal Designer Practice Note published
With key descriptions, best practice examples and FAQs, with supporting template resources.
Electrical businesses brace for project delays in 2025
BEB survey reveals over half worried about impact of delays.
Accelerating the remediation of buildings with unsafe cladding in England
The government publishes its Remediation Acceleration Plan.
Airtightness in raised access plenum floors
New testing guidance from BSRIA out now.