Subcontractor Default Insurance (Subguard)

When working with subcontractors, it’s important to protect yourself as the contractor from anything that could go wrong. It’s also in the best interests of the subcontractor to ensure the right insurance is set up to prevent problems for them. 

Subguard is one of the types of insurance that can be beneficial for project owners and general contractors, helping to prevent the burden of additional costs caused by the subcontractor. It can offer an alternative to bonds and is a popular choice for anyone looking for the right insurance protection.

Subcontractor default insurance doesn’t need to be expensive if you know where to look. By exploring the subcontractor default insurance market and comparing quotes, you can find the best deal for your needs.

What is Subcontractor Default Insurance?

Subcontractor default insurance, also known as subguard, is a type of insurance policy that is designed to provide protection against a subcontractor defaulting. If there are delays or additional costs caused by a defaulting subcontractor or supplier, the insurance will protect the project. 

Subguard insurance was first offered by Zurich in the 1990s and is now a common alternative to bonds that is used to help keep all kinds of construction and other projects running smoothly. In fact, subguard insurance is now used as the main form of protection for most projects, in place of performance bonds. Due to this, government programs and grants are now starting to accept subguard insurance instead of bonds.

Subguard is used as an agreement between the subcontractor and the general contractor. The general contractor has protection if the subcontractor defaults and it gives the contractor flexibility. Surety bonds are often quite slow when action needs to be taken, which can cause costly delays. However, subcontractor default insurance is an alternative to bonding that helps to keep projects on schedule with more flexible enforcement.

Another benefit of subcontractors default insurance is that it can save contractors money. Fees are lower than they once were, often under 2%, whereas they used to fall within 3-5%. So this type of insurance can be the more financially sound choice.

What Does Subcontractor Default Insurance Cover?

Subcontractor default insurance is designed to cover general contractors when the subcontractor defaults. This means that the insurance can protect you if:

● The subcontractor is not performing

● The subcontractor isn’t meeting their contractual obligations

● The subcontractor starts to experience difficulties

● There are delays in material deliveries or other deadlines

● Subcontractors or suppliers aren’t being paid on time

● There is a need to terminate the contract with a subcontractor

No contractor wants to have to deal with these issues, but it can happen if you have vetted your subcontractors to ensure they are the best choice for the project. SDI subcontractor default insurance ensures you have protection in these circumstances, helping to cover the unexpected costs of your subcontractor defaulting.

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Why You Need Subguard Insurance?

Subguard insurance is a must for any general contractors to protect their business. It’s vital that you are not on the hook for any unexpected delays or expenses that could occur when a subcontractor defaults.

Project owners will usually require contractors to have some type of insurance that protects them in situations like these. Although the answer to this issue has typically been surety bonds, many are now moving away from this where possible. They are able to use subguard insurance as a viable alternative, instead of relying on only performance bonds. This can help contractors save money and time, offering them a more flexible solution.

When you need to make a claim from your insurance provider, it’s the general contractor that will manage the claims process and not the bond company. Subguard can also give general contractors the option to default a subcontractor without having to terminate their contract. This means they can keep working on the project, preventing costly delays. The length of coverage for this type of insurance is also typically 3 to 5 years, and can even be extended further. Default is therefore covered beyond the scope of the project, whereas a performance bond usually expires after the one-year warranty has finished.

Another benefit is that coverage extends to the occurrence and aggregate limits of the contractor’s policy. This is usually greater than what would be provided by a performance bond, which offers further protection to the general contractor.

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Subguard Insurance Cost

What is the cost of a subguard policy to protect you from defaulting subcontractors? It’s important to consider both the premiums and other costs associated with these policies. High deductibles are to be expected, so it’s crucial to pay attention to how much they are when looking for the right policy.

Deductibles can reach more than $500,000 in some cases, although it obviously depends on the specifics of the project. High co-payment requirements may also be necessary and can be three to five times the cost of the deductible. This is why a subguard insurance policy makes much more sense for larger firms that are dealing with high-value contracts.

There may be high minimum premiums for the subguard insurance cost of around $250,000 per year or $20,833 per month with some carriers, although some providers don’t set minimum premium amounts. Minimum co-pays tend to be around 10% but claims are often allowed for up to 10 years. The table below shows the average cost of subguard insurance from the best companies:

Cost per Month Cost per Year Best for
NEXT $1,300 $15,600 Best overall; Fastest subcontractor default insurance
CoverWallet $1,500 $18,000 Comparing subcontractor default insurance quotes online
Tivly $1,700 $20,400 Comparing subcontractor default insurance quotes over the phone
Thimble $1,900 $22,800 On-demand subcontractor default insurance
Liberty Mutual $2,000 $24,000 Fast claims process, experience in the industry, reliability
Berkshire Hathaway $3,000 $36,000 Choosing from a broad range of surety options and other business insurance
Zurich $3,500 $42,000 Experience, support with pre qualifying subcontractors, innovative outlook

Unlike some other types of business insurance, the cost of this type of insurance means several upfront costs. However, the costs can be lower than surety bonds, although there can sometimes be greater costs if a subcontractor defaults due to high co-pays and deductibles.

A subcontractor default insurance policy can be pricey but it can also be the more cost-effective option compared to traditional performance bonds. Its more flexible nature could mean that if a subcontractor defaults, the general contractor will save money in comparison with a surety bond. They are also less complicated, due to a subguard bond being between two parties instead of three parties. They provide more control over finances.

Compare Cheap Subcontractor Default Insurance Quotes Online

Get all the best quotes from leading providers in a click of a button!

Best Subcontractor Default Insurance Companies

Below you will find some of the most popular subcontractor default insurance carriers. Take a look at our reviews to see the top pros and cons for the best subcontractor default insurance companies.

NEXT Subcontractor Default Insurance


  • Best overall

  • Issues an online proof of insurance instantly

  • Fastest subcontractor default insurance

  • Great customer service and reputation

  • Excellent rates

  • Outstanding value for money

  • Get a 10% discount if you buy two or more policies 


  • Couldn’t find any

NEXT specializes in offering fast coverage online. It does this by bundling insurance policies in pre-made insurance packages that already offer the limits and other perks you might need. Talk with a representative and NEXT might be able to further add a subcontractor default policy to your insurance package. Once you’re done purchasing, you can then use the NEXT app to get a certificate of insurance or view the limits of your subcontractor default policy. 

Best for: Best overall; Fastest subcontractor default insurance

Average cost: $1,300 per month

Our rating: 10/10

CoverWallet Subcontractor Default Insurance


  • Compare subguard insurance quotes online

  • View policy limits and pay premiums online via the MyCoverWallet dashboard

  • Cancel your coverage anytime

  • No hidden charges


  • Not an insurance company but an insurance broker 

Coverwallet is an insurance broker. You can use this company’s online quotes comparison tool to see which insurance companies offer subguard for general contractors. Once you’re done comparing quotes, CoverWallet allows you to buy the coverage immediately. And when you’re insured, this company creates an online account you can access to view policy limits, file a claim, and pay for premiums. 

Best for: Comparing subcontractor default insurance quotes online

Average cost: $1,500 per month

Our rating: 10/10

Tivly Subcontractor Default Insurance


  • Compare subguard insurance quotes over the phone

  • A partner of many reputable insurance companies

  • Responsive customer serve


  • You need to call to get a quote 

Similar to CoverWallet, Tivly allows you to compare different subguard insurance quotes from numerous insurance companies. However, you need to do this by calling and talking to a representative over the phone.  

Best for: Comparing subcontractor default insurance quotes over the phone

Average cost: $1,700 per month

Our rating: 10/10

Thimble Subcontractor Default Insurance


  • On-demand coverage

  • BBB-accredited and A-rated

  • Grants coverage without  a lot of questions

  • Has recently granted coverage to businesses in New York


  • You can’t reach customer service by calling

Thimble is an insurance company that specializes in policies that fit the needs of startups. A BBB-accredited and A-rated company, it allows you to purchase subcontractor default insurance within minutes. You avail the policy under Thimble’s contractor insurance package together with general liability, commercial property, and workers’ compensation insurance. 

Best for: On-demand subcontractor default insurance

Average cost: $1,900 per month

Our rating: 9/10

Liberty Mutual Subcontractor Default Insurance


● Fast claims process

● More than 100 years in the construction industry

● Tailored programs to meet specific circumstances

● Excellent ratings from business accreditation organizations


● Premiums can be high compared to other options

● Average customer satisfaction ratings

Liberty Mutual focuses on providing personalized solutions for general contractors to ensure they have the right protection against defaulting subcontractors. They offer unique program options and coverage, while also aiming to help keep things simple for their customers.

As one of the oldest insurance companies, they are experts in the construction industry and created targeted solutions. They also focus on ensuring the claims process is as smooth and easy as possible, helping to ensure you don’t lose too much time or money when you need to make a claim.

The strong focus on customer experience definitely makes Liberty Mutual one of the best options for contractors default insurance.

Best for: Fast claims process, experience in the industry, reliability

Average cost: $2,000 per month 

Our rating: 9/10

Berkshire Hathaway Subcontractor Default Insurance


● A+ rating from AM Best

● Online file claiming and tracking

● Flexible policy terms


● Average reviews

Berkshire Hathaway is another prominent provider of subguard default insurance. They provide a range of surety products, as well as subguard default insurance. Although the company is a lot newer compared to Liberty Mutual, it has still built itself a solid reputation over four decades.

Flexible policy terms and a range of business insurance options make them a good choice to protect your business when working with contractors and subcontractors. Claims can be made both over the phone and online, with other convenient services accessed online.

Best for: Choosing from a broad range of surety options and other business insurance

Average cost: $3,000 per month 

Our rating: 8/10

Zurich Subguard Insurance


● Leader in the field of subguard insurance

● Help with pre qualifying subcontractors

● Fast claims process


● Low customer ratings in terms of responsiveness to queries and claims 

Zurich was the first insurance company to begin offering a subcontractor default insurance program in the 1990s. The term subguard comes from a product that they offered. As such, they have plenty of experience offering this type of insurance. As a pioneering company in the field, they continue to improve and innovate.

One of the benefits of choosing Zurich is that they provide a program to guide you through the subcontractor prequalification process. They have a team of Risk Engineers to help you with this. They are a knowledgeable and experienced provider of this type of insurance and can make sure you get the solution that you need.

They are rated A+ by AM Best and have high ratings with other financial bodies too.

Best for: Experience, support with pre-qualifying subcontractors, innovative outlook

Average cost: $3,500 per month

Our rating: 10/10

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