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BONDS AND SURETY

An essential instrument utilized in construction projects that protect all levels of contractors and projects.
Bonds and surety are simple.

Bonds and Surety

 

Construction projects involve a network of individuals and companies working together. To mitigate risk and ensure project completion, various types of bonds are used. These bonds act as financial guarantees, protecting different parties involved in the project. In today’s construction requirements, bonds are an essential requirement before starting any projects. We highlight some of the bonds that are most regularly covered in the construction projects today.

1. Bid Bonds

Imagine a contractor submits a bid for your project. A bid bond guarantees the seriousness of this contractor. If they win the bid but refuse the project, the bond compensates you for the difference between their bid and the next closest one.

 

How it Works: The contractor pays a premium for the bond, issued by an insuerance company. If they win the bid but decline the project, the bond pays you (the project owner) the difference up to the bond amount. The bond then recovers the cost from the contractor.

2. Performance Bonds

This bond ensures the contractor completes the project according to the agreed-upon plans and specifications. If they fail to do so, the performance bond protects you from financial loss suffered.

 

How it Works: The contractor pays a premium for a performance bond issued by an insurance company. If they breach the contract by failing to complete the project as specified, the insurance company may step in and compensate you for the cost of hiring another contractor to finish it. The insurance company will then pursue the contractor for reimbursement.

performance bond

3. Payment Bonds

This bond safeguards the subcontractors, suppliers, and laborers who work on your project. It guarantees they will receive payment for their work and materials, even if the contractor faces financial difficulties.

How it Works: The contractor pays a premium for a payment bond issued by an insurance company. If the contractor fails to pay subcontractors or suppliers, they can file a claim against the payment bond. The insurance company investigates the claim and, if valid, will pay the subcontractor or supplier up to the bond limit. The insurance company then recovers the costs from the contractor.

4. Maintenance Bonds

This specialized bond offers protection against defects in materials or workmanship that may surface after the project completion. It ensures the contractor will fix any covered issues within a specified timeframe also known as the maintenance period.

 

How it Works: The contractor pays a premium for a maintenance bond issued by an insurance company. If defects arise within the guaranteed period, and the contractor fails to rectify them, the insurance company will cover the cost of repairs up to the bond limit. The insurance company will then seek reimbursement from the contractor.

maintenance bond

5. Additional Bond Types

Depending on project specifics, other bonds might be required. These include Supply Bonds guaranteeing delivery of materials, Subdivision Bonds ensuring completion of infrastructure in new developments, and Permit and License Bonds required to obtain necessary permits.

The type and amount of bonds required for your project depends on many factors including project size, complexity, local regulations, and your risk tolerance. Consulting a construction broker and bonding professional can help you determine the appropriate bonds for your specific project.

Benefits of Bonds in Construction

Construction bonds offer significant benefits for both project owners and contractors. For owners, they provide a peace of mind, knowing financial protection exists if any of the the contractors defaults on their obligations. Contractors benefit by demonstrating their commitment to the projects and potentially being able to secure better bidding opportunities. Additionally, bonds create a more secure environment for subcontractors and suppliers, fostering trust within the construction ecosystem especially in Singapore.

Download our Bond and Surety Brochure

For more information and the types of surety or bonds insurance that we place, download our surety insurance handbook HERE.

bond and surety insurance handbook

Acclaim Construction Practice

When it comes to securing the success of your construction project, Contractors’ All Risk insurance is the ultimate shield against uncertainty. As each project and risk is unique, our Acclaim Construction Practice team will work with you throughout the whole process from placement to claims.

Acclaim Construction Practice provides integrated insurance solutions to projects across both public and private sectors. These include residential/mixed developments, industrial plants and infrastructure projects such as bridges, roads, rails, power & utilities in Singapore and across the region.

Through our global networks, we have a global Construction Practice comprising experienced construction insurance practitioners from USA, Europe and Asia as expert resources to serve on highly specialised and complex projects such as tunnels and dams. This allows us to access the global insurance markets for capacity as well as for competitive solutions.

Why you should consider a group personal accident insurance plan
Group personal accident insurance, Employee benefits insurance Singapore

Why You Should Consider A Group Personal Accident Insurance Plan

February 22, 2024

As a business owner, you are responsible for the safety and well-being of your employees. However, what your employees do outside of work is their purview and not within your control. Unfortunately, they could get into an accident outside of work hours, impacting your business and leaving you short-staffed.

When this happens, you will want to ensure your business does not suffer due to their absence. That is where group personal accident insurance comes in handy, offering employees 24-hour coverage in the event of accidental bodily injuries. Such is its prevalence; this insurance has since become a standard part of most companies’ employee benefits programmes.

If you have yet to incorporate a group insurance policy for accidents to safeguard your employees, please consider doing so as soon as possible. Let us discuss how this insurance can benefit your business and why it might be worth adding this coverage to your company’s benefits package.

Group Personal Accident Vs. Work Injury Compensation: What Are The Differences?

Unlike work injury compensation, group personal accident insurance is not mandatory in Singapore. As such, many employers may be wondering why they require group personal accident insurance when they already have work injury compensation insurance. The answer is simple – both insurance products are vastly different, with distinct coverage intentions.

Work injury compensation only covers specific claims situations arising from work accidents. Meanwhile, group personal accident insurance provides more of a general accident cover. For example, your employees are covered under group personal accident insurance but not WICA if they are injured while taking public transport to or from work.

Please note that group personal accident insurance does not sufficiently cover an employer’s liability in work accident situations. Therefore, this insurance is not an alternative to work injury compensation insurance. Ideally, both should be vital aspects of your employee benefits insurance portfolio.

What Does Group Personal Accident Insurance Cover?

Image of an Doctor examining an injured patient

The best thing about group personal accident insurance is that it offers worldwide, 24-hour coverage in the event of accidental bodily injuries. So, your employees are covered regardless of where and when they incur an injury due to an accident.

A typical group personal accident policy offers coverage for:

  • Death – a lump sum benefit is payable upon death to the beneficiary if the insured passes away due to an accident.
  • Permanent and total disability – the insured received a lump sum upon suffering permanent incapacitation due to an accident.

You can also consider the following optional extensions for additional coverage:

  • Ambulance costs
  • Fracture benefits
  • Funeral expenses
  • Hospital recuperation
  • Medical expenses
  • Temporary total/partial disability

Who Needs Group Personal Accident Insurance?

A group of smiling working adults in an office

The good news is that group personal accident insurance is customisable depending on your company’s needs, making it ideal for businesses in high-risk industries, such as construction or pharmaceutical manufacturing, or those with large groups of employees. Instead of viewing group personal accident plans as an expense, consider them a helpful add-on to your employee benefits insurance policy.

What Are The Benefits Of Group Personal Accident Insurance

Group personal accident insurance can be a crucial safety net for your business and employees, safeguarding them from unforeseen circumstances. Here are the benefits for both individuals and organisations.

Benefit #1: Financial Security In The Event Of An Accident

In the unfortunate event of death or disability due to an accident, the policy will make a payout to the beneficiary of the insured, ensuring those affected can cope with the financial challenges arising from this life-altering incident. 

Benefit #2: Covers Medical Expenses And Hospitalisation

In severe accidents, the insured may need to be hospitalised for treatment. During this period, the medical expenses can quickly add up, causing undue stress on the patient and their family. Group personal accident insurance can help alleviate this burden, allowing the individual to focus on their health and well-being and enjoy a smoother recovery process. 

Benefit #3: Enhances The Company’s Reputation

Having a comprehensive group personal accident insurance in place demonstrates a company’s commitment to safeguarding its employees. When employees know they are valued, they form a positive opinion of the organisation, enhancing its reputation.

This comprehensive insurance coverage can also be utilised as an attractive benefit to lure top talent. In today’s competitive job market, a company’s benefits package can often impact a prospective employee’s decision. Incorporating a group personal accident policy can be a compelling factor in attracting skilled professionals to join the organisation.

A comprehensive group personal accident insurance plan can be an essential financial tool to safeguard your business from unforeseen accidents. However, please bear in mind that different insurers provide varying levels of benefits and coverage. Therefore, we recommend doing your research and finding out what you need before engaging an insurer.

If you need help deciding which insurance package is suitable for you, please consult Acclaim Insurance Brokers. We have been in the insurance brokerage business for 40 years. With our extensive experience, we can help anticipate risk at every level, delivering bespoke, cost-competitive insurance solutions that best fit your business needs. Contact us today to learn how we can help you.

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