Subcontractor default insurance is a GC-controlled alternative to requiring performance and payment bonds from every sub. The GC buys a policy, enrolls qualified subs, and if one defaults, the GC handles the fix and claims the cost from the insurer. is a well-known product name that’s sometimes used generically.
Key differences from a sub’s surety bond:
- Control: with SDI, the GC decides how to fix a default, without waiting on a surety’s investigation.
- Deductible and co-pay: the GC carries a significant deductible per loss plus a co-pay layer, so it keeps real skin in the game.
- Prequalification: the insurer expects the GC to run a documented prequal program, and coverage depends on following it.
- Scope of loss: covers direct costs of default (completion, correction, sometimes indirect costs like acceleration), subject to the policy terms.
Premium is a percentage of enrolled subcontract value. On many programs, the cost is recovered through the GC’s fee structure or billed as a line item on cost-plus and GMP work, which owners increasingly scrutinize.
Why it matters
On large GCs’ programs, SDI can be cheaper and faster than sub bonds, but it shifts risk to the GC through the deductible. A program needs strong prequalification, documentation and claims handling to work.
Common mistakes
- Enrolling subs without completing prequal documentation, which can void coverage.
- Underestimating deductible exposure across several defaults in a year.
- Billing SDI to owners without a clear contract provision.
- Late notice of a sub in trouble.
How os.construction handles it
We’re building vendor records that link prequal data, enrolled subcontract values and open commitments, so SDI enrollment and exposure are clear. It’s in development.