When general contractor clients or construction firms approach you about securing a construction bond for their upcoming projects, it’s normal for them to ask questions about what they need to do to fulfill the contract terms. One component that tends to confuse even experienced contractors is the general indemnity agreement (GIA).
Before a surety issues a bond, it will require the contractor sign a GIA. The GIA ensures that the surety is made whole for any losses or expenses it suffers as a result of issuing the bond. The GIA often elicits several questions from construction firms. Here are some smart and straightforward answers to those questions.
Why do I have to sign this indemnity agreement?
If the client is new to the bonding process, this is a very typical question. Here’s how you can answer it:
It’s important for us to know that your company is in partnership with us on this project. We want to ensure that you are willing to back the same actions that you are asking us to.
Why does my (spouse, business partner, company officers) have to sign this agreement?
Often, the spouse of a person completing the surety bond application has nothing to do with the business, and this is a normal question. Here’s how you can answer it:
Requiring personal guarantees is standard underwriting procedure. If a claim must be made, it ensures that personal assets will be available if company assets cannot cover the claim. This is very similar to the process of obtaining a bank loan. The bank will also require a personal guarantee from a spouse, business partner, or company officers.
Why do you need all this personal information?
The surety bond document checklist can look overwhelming to a client, and you may get this question. Here’s how you can answer it:
We need personal information (like Social Security numbers, addresses, tax returns) to check the credit of those signing the GIA to be sure that financial accountability is followed in issuing the bond. This is similar to the process your bank uses when you apply for a loan or line of credit.
Why do I need to sign the GIA if I have commercial general liability insurance?
If your client is new to surety bonds, you may get this question. Here’s how you can answer it:
Your general liability insurance helps protect you against losses associated with injury or property damage your business causes. It does not cover paying the losses or expenses we may incur by issuing a bond.
Why do I even need a surety bond -- and this GIA?
Your client may think their license bond is enough to guarantee a contract. Here’s how you can answer this question:
The surety bond is in place to ensure that your company completes the project in accordance with the contract between you and the property owner. The GIA ensures that the surety is compensated for any losses or expenses incurred as a result of issuing the bond.
Use These Answers With Your Clients
Figuring out how to answer your clients’ questions about general indemnity agreements can be challenging, especially when they may not be familiar with the different clauses and provisions. Taking the time to go over these questions with them helps establish you as a trusted expert and business partner.
At Gray Surety, we’re proud to provide a variety of contract and commercial surety bonds to assist your general contractor clients. Our experienced team is here to help you identify the correct solutions for all of your clients’ needs.
Have questions about our products? Contact Gray Surety today.
The foregoing information does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. For more information, we encourage you to consult with your attorney.
Support your general contractors the right way
At Gray Surety, we understand that general contractors need simple and effective ways to reduce their liability risk regardless of the type of projects they take on. Whether your general contractor clients are working with new subcontractors for the first time or have an established team of experts they trust, we’re here to help with both performance bonds and payment bonds to protect all parties.
Have additional questions or concerns? Contact Gray Surety to learn more.
The foregoing information does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. For more information, we encourage you to consult with your attorney.