Construction guarantees
Before the employer, your client, hands over the site, they usually want security that the job will be done. That security is a construction guarantee, issued to the employer by an insurer, the , and arranged by CivilSure. This page walks through the whole thing: what a guarantee is, what it costs, and how the application actually runs.
Guarantees are drawn against a , so first-timers start with the facility. Not sure where you are in the process? Call 080 777 7771 and we will tell you.
Subject to Underwriting and the guarantor's approval
What it is
A construction guarantee is a written promise issued to the employer by an insurer, the guarantor. CivilSure arranges the guarantee and manages the process; we do not issue it ourselves, and the guarantor is a licensed insurer, named on your quotation and on the guarantee itself. The employer is what standard contracts call your client: the party that awarded you the work, also known as the . Not your own boss. If things ever go wrong, the demand on the guarantee comes from them.
If you do not meet your obligations under the contract, the employer can claim against the guarantee, on the terms of its wording. The guarantee protects the employer, not you. It is not cover for your own losses, and if the guarantor pays out, you remain liable to reimburse it under the indemnity you sign when the facility is opened.
What applies to you is set out in your facility agreement and the guarantee wording. This page is a plain language summary, not the paperwork.
The types
Different stages of a contract call for different guarantees, and all of them are drawn against the same facility. These are the ones we arrange. For the side by side comparison, see All Guarantee Types.
How it works
Think of the facility as an approved limit with the guarantor, like an account you open once. Every guarantee after that is drawn against it. That is why the first application is the heavy one and the rest are quick.
Once off. Typically 10 to 14 working days, longer if terms need negotiating.
Ideally at tender stage, before the contract is awarded. If the tender needs an indication that a guarantee will follow, a can support it while the facility is assessed, subject to underwriting.
The most time-consuming part, and it happens once. After approval you will not resubmit these unless the facility changes, apart from your annual financials at renewal.
Disclose everything material up front, including cash-flow strain or unusual project risk. In our experience, non-disclosure is a common reason facilities are declined.
We prepare the submission: who you are, your track record and project experience. The guarantor then runs its own credit vetting, looking at financial strength, current workload, past guarantee history and the experience of your key people.
We go through the feedback with you. Depending on what it says, we may suggest additional security, approach an alternative guarantor, or negotiate the conditions. Each guarantor has minimum criteria, and if you fall short of them we tell you what would need to change to qualify later. This step can add up to seven working days.
Sets out your facility limit, the premium and , the and any conditions. Read the securities carefully and ask about anything you are not comfortable signing: they are what gives the guarantor against you if a guarantee is called.
The facility documents are signed in front of an attorney, whose fee you pay directly. Everyone signing must be there: directors, trustees and any third-party sureties, with original IDs, proof of address and company registration documents. Getting everyone in one room is usually the slowest part. Once signed, the facility is typically active the next working day.
Per project. Typically 2 to 4 working days from the employer's approval of the wording, if documents and payments are in order.
Once the contract is awarded, send us the Letter of Appointment and the full contract data. We submit the application, the guarantor prepares draft wording, and you and the employer review it. We negotiate any changes the employer asks for, and their written acceptance comes back to us.
A premium invoice and a collateral invoice, both explained under what it costs. On larger contracts with a longer period, a debit order can be agreed for the collateral: part upfront and the balance over an agreed number of months.
On payment, a PDF of the guarantee is emailed to you with the contingency policy (the policy document that sits behind the guarantee) and the tax invoice, and the original is couriered to you.
The money
Two main amounts on each guarantee, plus a once-off signing cost when the facility is opened. The premium is the price, the collateral is security that can come back. Other charges, such as extension fees, are set out in your facility terms. Everything here is set on underwriting and confirmed on your facility quotation.
Calculated on the guarantee amount and the duration, at the rate on your facility, with a minimum premium per guarantee. Both are set out on your facility quotation, excluding VAT. The premium is the price of the guarantee and is not refundable.
A cash amount per guarantee, a percentage of the guarantee amount that is higher for on-demand wording. It is held by the guarantor as security rather than charged as a fee, and it is refundable once the guarantee has expired or been returned, your obligations under the facility are discharged and anything owed has been settled. If a guarantee is called, the guarantor may apply those funds to its loss. Whether it earns interest, and on what basis, is set out in your facility agreement.
The facility documents are signed in front of an attorney, and the attorney's fee is payable directly to them. Ask us what to budget when the signing is arranged. It belongs to the facility setup, not to each guarantee.
The rates, the minimum premium and the collateral percentage are set on the guarantor's underwriting and appear on your facility quotation, which is the document that binds; ask us at any point and we will walk you through the figures in writing. That includes CivilSure's own fee for arranging the facility and the broker commission; the Disclosures section below covers who earns what. Conditional (surety style) wording requires the employer to prove a claim before the guarantor pays; on-demand wording pays on a compliant written demand. Which one your contract uses is set by the contract and the employer, and it moves both the premium and the collateral.
While it runs
A guarantee is not fire and forget. Three things are worth staying on top of while the contract runs.
On variable guarantees, send interim payment certificates and practical or certificates as you reach them. Each one reduces your exposure and releases capacity on the facility for the next job.
If the contract runs past the guarantee period for reasons outside your control, tell us before the date passes. The guarantor will want the reason, recent progress reports and usually the employer's approved extension letter. Extension fees apply, as set out in your facility terms.
Depending on the wording, a guarantee ends at a fixed expiry date, at or at the final , whichever the wording says comes first. The guarantor needs the certificate that proves the milestone.
On cancellation: as a rule only the employer can cancel a guarantee, subject to its wording, and the guarantor can give notice of cancellation where the terms allow it. You cannot simply call it off because the relationship on site has soured.
Claims
Nobody plans for this part, which is exactly why it is worth understanding before you sign.
The employer submits a formal written demand to the guarantor.
The guarantor's attorneys check two things: the wording of the guarantee, and whether the demand complies with it. Whether a demand is valid depends on the wording of the guarantee issued, not on who is right in the dispute under the contract.
If the demand is valid, the guarantor pays the employer and then recovers the amount from you under your indemnity. The money moves first; the argument about the contract comes after.
If the demand is not valid, the attorneys formally decline it. On the paperwork, declining a claim is called .
The guarantee protects the employer, not you. It is not cover for your own losses, and it does not remove your liability. If the guarantor pays, you remain liable to reimburse it under your indemnity, and the securities on your facility are what it recovers against.
Disclosures
The parts of the arrangement you are entitled to know about.
Quick answers
The ones contractors ask us most often.
Yes. The facility is the approved limit the guarantor gives you, and every guarantee is drawn against it. Opening one typically takes 10 to 14 working days, so start before the tender needs it. Once your facility is open, a guarantee typically takes 2 to 4 working days from the employer's approval of the wording.
A letter stating that a guarantee facility is being arranged for you, used at tender stage as an indication before the guarantee itself exists. It is subject to underwriting. Employers often ask for one with the tender, and it is the quickest of the three applications. Apply for a Letter of Intent.
Usually, yes. Collateral is held by the guarantor as security rather than charged as a fee, and it is refundable once the guarantee has expired or been returned, your obligations under the facility are discharged and anything owed has been settled. You can also choose to leave it in the collateral account for your next guarantee. The exception matters: if a guarantee is called, the guarantor may apply those funds to its loss. The premium, by contrast, is the price of the guarantee and is not refundable.
Conditional, or surety style, wording requires the employer to prove its claim before the guarantor pays. On-demand wording pays on a compliant written demand, without the dispute under the contract being resolved first. Which one applies is set by the contract and the employer, and it changes both the collateral and the premium on your quotation.
We go through the feedback with you and look for a workable route: additional security, an alternative guarantor, or negotiating the conditions attached. Each guarantor has minimum criteria, and if you fall short we tell you what would need to change to qualify later. Disclosing everything material up front helps avoid a decline.
Yes, up to your facility limit. Each guarantee uses part of the limit and releases it when the guarantee expires or is returned. On variable guarantees, submitting payment and completion certificates as you reach them releases capacity sooner.
This page is a summary written in plain language. What applies to you is set out in your facility agreement and the guarantee wording, and nothing here changes that. If any term here is unclear, we will gladly talk it through before you sign anything.
Facility setup typically runs ten to fourteen working days, and longer where terms need negotiating. That is comfortable while the tender is still open and painful once the award letter is on the table. Tell us where you are in the process and we will take it from there. No obligation either way.
