Podcast
Questions and Answers
What type of bond guarantees a contractor will complete a project as per the contract terms?
What type of bond guarantees a contractor will complete a project as per the contract terms?
Which type of builder's risk insurance covers only specific perils named in the policy?
Which type of builder's risk insurance covers only specific perils named in the policy?
What is the primary function of a Bid Bond in a construction project?
What is the primary function of a Bid Bond in a construction project?
Which type of insurance provides coverage against errors and omissions in professional services?
Which type of insurance provides coverage against errors and omissions in professional services?
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Which of the following steps is not part of the risk management process in insurance?
Which of the following steps is not part of the risk management process in insurance?
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What is the primary purpose of a Payment Bond in construction?
What is the primary purpose of a Payment Bond in construction?
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What does Wrap-Up Insurance encompass?
What does Wrap-Up Insurance encompass?
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What type of insurance would cover medical expenses and lost wages due to workplace injuries?
What type of insurance would cover medical expenses and lost wages due to workplace injuries?
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Study Notes
Construction Bonds
- Surety Bonds: A three-party agreement guaranteeing 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. Surety compensates if not.
- Performance Bond: Guarantees the contractor completes the project as agreed, or the surety steps in to finish.
- Payment Bond: Protects workers, subcontractors, and suppliers from non-payment by the contractor. Surety pays if issues arise.
- Penalty Amount: Maximum liability the surety has in case of a breach.
Insurance
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Property Insurance: Covers physical damage or loss to the construction site and materials. Includes:
- Builder's Risk (BR): Specialized property insurance for construction projects, excluding certain specific risks.
- All-Risk Builder's Risk: Covers all physical losses except specified exclusions (e.g., floods, earthquakes).
- Named-Peril Builder's Risk: Covers only perils explicitly listed in the policy.
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Liability Insurance: Protects against third-party claims for bodily injury or property damage.
- Professional Liability Insurance: Covers errors and omissions in professional services.
- Public Liability Insurance: Covers liabilities for injuries to third parties from contractor operations.
- Umbrella Excess Liability Insurance: Extends coverage limits of existing liability insurance policies.
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Employee Insurance: Protects workers and provides liability coverage.
- Workers' Compensation: Covers medical expenses, rehabilitation, lost wages due to workplace injuries.
- Unemployment Insurance: Provides benefits to workers who lose their jobs through no fault of their own.
- Wrap-Up Insurance: Comprehensive coverage for 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, allowing contractors to focus on operations.
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Description
This quiz covers key concepts related to construction bonds and insurance. Learn about surety bonds, bid bonds, performance bonds, and different types of property insurance, including builder's risk policies. Test your knowledge on how these financial instruments protect stakeholders in construction projects.
