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Questions and Answers
What type of bond ensures the contractor will complete the project according to the contract terms?
What type of bond ensures the contractor will complete the project according to the contract terms?
Which bond protects workers, subcontractors, or suppliers from non-payment?
Which bond protects workers, subcontractors, or suppliers from non-payment?
What is the maximum monetary liability of the surety under a bond referred to as?
What is the maximum monetary liability of the surety under a bond referred to as?
Which type of insurance specifically excludes liability for damage to others?
Which type of insurance specifically excludes liability for damage to others?
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What type of liability insurance covers errors and omissions in professional services?
What type of liability insurance covers errors and omissions in professional services?
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Which type of insurance provides coverage for medical expenses from workplace injuries?
Which type of insurance provides coverage for medical expenses from workplace injuries?
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What is the first step in risk management as outlined?
What is the first step in risk management as outlined?
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What does Wrap-Up Insurance encompass?
What does Wrap-Up Insurance encompass?
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Study Notes
Construction Bonds
- Surety Bonds: A three-party agreement. Guarantees a contractor's performance or payment obligations. Involves the contractor (principal), the owner (obligee), and a surety (guarantor).
- Bid Bond: Ensures the contractor will honor their bid and sign the contract. The surety compensates the owner if the contractor doesn't.
- Performance Bond: Guarantees the contractor will complete the project according to the contract terms. If not, the surety steps in to finish.
- Payment Bond: Protects workers, subcontractors, and suppliers from non-payment by the contractor. The surety pays if the contractor doesn't.
- Penalty Amount: The maximum monetary liability of the surety.
Insurance
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Property Insurance: Covers physical damage or loss to construction sites and materials (e.g., fire, vandalism).
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Builder's Risk (BR): Specialized property insurance for construction projects, excluding specific risks like underground utilities.
- All-Risk Builder's Risk: Covers all physical damage except specified exclusions (e.g., floods, earthquakes).
- Named-Peril Builder's Risk: Covers only the perils explicitly listed in the policy.
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Builder's Risk (BR): Specialized property insurance for construction projects, excluding specific risks like underground utilities.
- Equipment Floater Policy: Protects construction equipment from loss or damage. Excludes liability for damage to other parties.
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Liability Insurance: Protects against third-party claims for bodily injury or property damage.
- Professional Liability: Covers errors and omissions in professional services.
- Public Liability: Covers injuries to third parties from contractor operations.
- Umbrella Excess Liability: Extends coverage limits of existing liability insurance policies.
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Employee Insurance: Protects workers and provides employer liability coverage.
- Workers' Compensation: Covers medical expenses, rehabilitation, and lost wages due to workplace injuries.
- Unemployment Insurance: Provides benefits to workers who lose their jobs without fault.
- Wrap-Up Insurance: Comprehensive coverage purchased by the project owner that encompasses all contractors and subcontractors.
Risk Management in Insurance
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Steps:
- Identify and recognize risks.
- Assess exposure and potential losses.
- Mitigate or transfer risks (e.g., through insurance).
- Implement loss prevention measures.
- Monitor and review risk management effectiveness.
- Purpose: Shifts the financial burden of unforeseen risks to insurance companies, enabling contractors to focus on operations.
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Description
This quiz delves into the essential concepts of construction bonds and property insurance related to construction projects. It covers types of surety bonds, including bid, performance, and payment bonds, as well as property insurance specifics like builder's risk. Test your knowledge on the key elements that protect contractors and project owners.
