CONSTRUCTION GUARANTEES

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Most contracts require contractors to provide a construction guarantees to the owner (or employer) guaranteeing the contractor’s performance undertaken in terms of the construction contract, or principal building agreement (PBA).

We offer affordable & flexible Construction Guarantee solutions for all segments of the civil & construction industry – from the small bakkie-builder, right up to large, national companies.

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We offer the following Construction Guarantees:

Performance Guarantee, Construction Guarantees | Civilsure

Performance Guarantees

Building contractors are often required to provide Performance Guarantees after being awarded a contract. Performance Guarantees provide the Employer with security should the Contractor not perform his obligations or complete the work, as agreed, in the construction Contract.

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Performance Guarantee, Construction Guarantees | Civilsure

Advance Payment Guarantees

Some contracts make provision for the employer to pre-finance a contractor by making payments before the project begins. For example: When the employer agrees to give the contractor money upfront to pay sub-contractors to complete the project. An Advance Payment Guarantee will protect the sub-contractors and the Employer’s investment should the contractor suddenly go bankrupt.

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Advanced Payment Guarantee, Construction Guarantees | Civilsure
Retention Monies Guarantee, Construction Guarantees | Civilsure

Retention Guarantees

A Retention Guarantee is a financial security held by the Employer or main contractor to ensure that sub-contractors fulfill their obligations under the contract. It protects the Employer by guaranteeing that the Contractor will carry out all necessary work to correct structural and/or other defects discovered immediately after completion of the project as well as during the maintenance period.

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Retention Monies Guarantee, Construction Guarantees | Civilsure

Bid Bonds

A Bid Bond is purchased when a Contractor is bidding on a tendered Contract. The Bid Bond pre-qualifies the Contractor and provides security to the Employer/Owner by guaranteeing that the Contractor will enter into the Contract if it’s awarded.

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Bid Bonds
Retention Monies Guarantee, Construction Guarantees | Civilsure

Fuel Guarantees

In South Africa, by law, petrol cannot be bought on credit by a fuel retailer. Fuel companies, such as Sasol Oil, BP Southern Africa, Total South Africa etc. can supply Fuel Retailers only on the following basis:

  • Cash up front / Pre-payment, or
  • Guarantee issued in favour of the fuel company to act as security against any payment default by the retailer

A guarantee enables the fuel company to grant the retailer a credit facility, allowing the retailer to pay for the fuel after delivery, assisting the retailer in managing his cash flow. This guarantee extends to cover other trade receivables the retailer may be obligated to pay the fuel company for, in terms of their retailer or lease agreement. Trade receivables can include rental of the premises, royalties, rates and taxes, lubricant purchases etc.

Retention Monies Guarantee, Construction Guarantees | Civilsure
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ABOUT THE APPLICATION

What documents should I have prepared for the application?

  • Company profile (including an organogram and copies of the current and previous contracts)
  • Two years’ financial statements and three months’ bank statements
  • Letter of appointment
  • Contract information
  • Guarantee wording requirements
  • Company registration documentation
  • Copies of all members’ identity documents and income tax numbers
  • Copy of letterhead
  • Tax clearance certificates
  • CIDB certificate

What will the Guarantor look at when assessing my application?

All applications are subject to a thorough analysis to establish the Contractor’s risk profile. This will include an assessment of the Contractors’ financial standing and their resource capabilities to fulfill the Contract obligations.

For Corporate Clients, emphasis is placed on:

  • the financial standing of the Contractor
  • the company structure and shareholding
  • the Contract information
  • the Guarantee wording requirements
  • the securities available

Get all the benefits of our Construction Guarantees:

Tender on bigger projects

Unlike Bank Bonds, we don’t require 100% collateral when issuing Construction Guarantees. With cash collateral requirements of only 7–15%, our Guarantee facility allows you to free up your cashflow and tender on bigger contracts.

Ensure your project’s success

When issuing a Construction Guarantee, the Guarantor/Insurer agrees to back you and become your co-principal debtor. This means you’ll then have a third-party’s professional opinion of your ability to perform and complete the project.

Get your project started without delay

Once your initial Guarantee facility has been approved, you can be assured of a fast and seamless process when requesting Guarantees on all your future projects.

Pay less Tax

Both the Construction Guarantee & Contingency Premiums are considered insurance expenses and are therefore deductible for company tax purposes.

Save for a rainy day

Your Collateral Funds (Contingency Premium), reserved by the Insurer, will earn investment income at current interest rates. Should your Guarantee be returned, expire, or your facility cancelled, the Contingency Premium will be returned to you, inclusive of interest earned. The Contingency fund also allows you to accrue reserves for unforeseen risks on a particular project, or to allow yourself additional capacity for future projects.

Save time and resources

There’s no need to go in search of a supplier for your other insurance needs. We offer a full range of niche, insurance products at exceptionally competitive rates.

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MEET THE TEAM

Meet the experts who will guide you through the application process with ease. Our entrepreneurial clients need an insurance partner who understands the complex dynamics of the construction industry and the associated business risks. Our highly trained team offer expert advice, friendly service and products at exceptionally competitive rates.

Siphelele

Specialist Construction Consultant

Siphelele has a real passion for the Construction Industry. He’s able to quickly assess the needs of his clients and to expertly guide them toward choosing the correct policy. Thanks to his many years at CivilSure, he’s also able to quickly interpret and explain the ‘fine print’ in every policy.

Thembela

Marketer

Thembela is a smart risk assessor and has the product knowledge to correctly advise you which product will best suit your needs. Give her call, she’s a Contractors All Risk, Guarantee and Civil Insurance expert.

Seko

Admin

Seko is structured and tactical. She has a solid understanding of the Construction Industry and is able to adapt her knowledge to suit most project scenarios. Her determination and tenacity contribute to her uncanny ability to match the correct cover with the correct client.

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BUT DON'T JUST TAKE OUR WORD FOR IT...

Take a look at what some of our customers have to say.

“The CivilSure team has changed my opinion of insurance brokers. Their professionalism and expert advice has helped me find the correct cover for my project. They’re a credit to the industry. Please accept my thanks for a job well done."

~ Khumo Ntlatleng

“CivilSure offers Guarantees that are easy to understand and most importantly, cost-effective. Their client service is excellent. They found us a guarantee solution which works for our entire operation. Their top-quality service and passion puts them one step ahead."

~ Anthony Voigt

FREQUENTLY ASKED QUESTIONS

What’s the role of the Insurer when issuing the Construction Guarantees?

The Insurer guarantees the Contractor’s performance. If the Contractor performs their obligations as agreed, the Insurer doesn’t need to get involved.

If the Contractor defaults or fails to honour their obligations, the Insurer steps in and pays the Employer the agreed-upon guarantee amount. In most cases, the Insurer will hold the Contractor liable and will expect reimbursement of the amount paid.

Is an Advance Payment Guarantee the same as a Performance Guarantee?

A performance Guarantee protects the Employer. An Advance Payment Guarantee protects sub-contractors and suppliers, helping ensure they receive payment from the Contractor for the work they performed, or the materials they supplied.

How can Construction Guarantees affect my business?

Depending on the size of your operation and the type of work you do, Construction Guarantees could affect your business in several different ways:

Construction Guarantees can be expensive. When Contractors purchase a Guarantee, the premium is usually calculated as a percentage of the project’s cost. The more expensive the project, the higher the premium.

But once you have a Guarantee Facility in place, you can use it as marketing tool to promote your business. Clients have more confidence in firms that have contractually binding financial guarantees that ensure jobs will be completed according to contract.

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FIND OUT MORE ABOUT GUARANTEES

Help! What construction insurance do I need?

Understandably this can be a challenge as there is a myriad of cover available in the construction insurance landscape.

Let’s quickly unpack 5 Construction Insurance options for you.

Get your Letter of Intent almost instantly

The term ‘Letter of Intent’ (LOI) is typically used to describe a letter from an Employer to a Contractor (or from a main Contractor to a Subcontractor) indicating the Employer’s intention to enter into a formal written contract for Works described in the letter, and asking the Contractor to begin those works before the formal Contract is executed. While an Letter of Intent may come in many forms, it’s essentially a communication expressing an intention to enter into a Contract at a future date.

When is a Performance Guarantee called on?

Building Contractors often ask us the question: When is a Performance Guarantee called on? When your company starts bidding on projects for cities, provinces or municipalities, you’ll be expected to provide assurance that you can meet the obligations detailed in the Contract.

This assurance comes in the form of a Performance Guarantee. Basically, what happens is that a surety company (an insurer or bank), for a certain fee, steps in and guarantees your performance. Surety companies don’t work directly with Contractors. Instead, they partner with brokerages like us.

Four types of Contract Guarantees and What They Insure

Contract Guarantees in the construction, engineering, manufacturing and mining service industries are almost mandatory. Our range of Construction Guarantees are as varied as your requirements. Here’s a short list of the four types of Contract Guarantees and what they insure.

How do you get a Performance Guarantee?

When applying to get a Performance Guarantee, you’ll have to answer basic questions about your professional work experience and your company’s financial history. If your business has more than one owner, the financial credentials of all owners must be submitted.

What’s the difference between a Performance Bond and a Performance Guarantee?

The term Performance Bond is often misleading, which can leave contractors confused about the difference between a performance bond and a performance guarantee. Most construction Performance Bonds are actually Guarantees. Bonds and Guarantees are related but are different. The right to claim under a Guarantee is linked to non-performance of the underlying contract. Under a Bond, the bank usually pays on demand regardless of the underlying contract.

Bank Guarantee to Fuel Guarantee

A Fuel Guarantee is security against payment default by the Retailer for fuel delivered by a Fuel Company. The Guarantee covers fuel, lubricant, rent & more

What is a Performance Guarantee?

A Performance Guarantee is a contractor’s promise to complete the construction project within the deadlines, while meeting all contractual conditions.

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