Insurance that a general contractor buys to protect against the risk that a subcontractor fails to complete their work.
Subcontractor default insurance is a first-party insurance product purchased by a general contractor to cover losses caused by subcontractor default or non-performance, serving as an alternative to requiring performance bonds from each subcontractor. SDI typically requires the GC to prequalify subcontractors and manage the claim directly, which can result in faster project recovery than traditional surety bond claims. The GC shares risk with the insurer through a deductible and co-insurance structure.
A GC uses SDI instead of requiring individual performance bonds from 40 trade subcontractors, allowing faster procurement and a single recovery process if any subcontractor defaults.
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