Tennessee Risk Management, Bonds & Insurance
Bonds and insurance each cover a specific party or peril. This chapter covers the payment bond and builder's risk insurance.
The payment bond
On a project with the three standard construction bonds, the payment bond protects subcontractors and suppliers if the general contractor fails to pay them. A bid bond protects the owner against a low bidder that backs out, and a performance bond protects the owner by assuring completion - each bond runs to a different party.
Builder's risk insurance
Builder's risk (course-of-construction) insurance covers the structure and materials while the project is being built, against perils such as fire, wind, and theft. It is distinct from workers' compensation, which covers employee injuries, and from auto liability, which covers vehicles - different risks entirely.