Maintenance Bonds in Singapore

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Maintenance Bonds protect clients against defects after construction has been completed.

Provide helps you get comprehensive & affordable Maintenance Bonds. Our quick response times mean that you can have your Maintenance bond requirements easily addressed, allowing you to focus on running your business.

What are Maintenance Bonds?

Maintenance bonds protect the owner of a completed project (e.g. construction project, installation project, etc.) against defects. Maintenance bonds act as insurance against shoddy workmanship, which can result in significant financial losses for project owners.

Maintenance Bonds are frequently requested by project owners as part of contract award requirements. Contractors who win projects will usually purchase Maintenance Bonds so that their clients are protected against potential faulty works.

How do Maintenance Bonds work?

Maintenance Bonds will pay out their insured amount to the project owner if faults arise during the maintenance/warranty period of a project. To better understand how this process works, we should first understand the 3 main parties that are involved in a Maintenance Bond.

The 3 key parties in a Maintenance Bond:
1. Principal (the contractor who is the party performing the physical works)
2. Beneficiary (the client who awards the contract)
3. Surety (the insurance company)

For instance, if a completed building has a 1-year warranty period, and multiple pipes start leaking, the Maintenance Bond will be activated to pay for the repair costs. The insurer will then recover the cost of the claim pay out from the contractor.

Maintenance Bonds are only valid for the period you purchase it for. For instance, if you purchase a Maintenance Bond for 12 months, only defects that are reported and claimed for within that 12-month period will be covered. If defects arise after this period, they won’t be covered by the insurer. It’s therefore important to have a Maintenance Bond with a sufficiently long duration to ensure that any potential defects that arise will be covered by the insurer, saving you from potential financial losses.

When do you need an Maintenance Bonds? How much coverage should I have?

Maintenance Bonds are often required by clients when awarding construction-related projects. For instance, project owners who are developing houses or commercial malls will often require maintenance bonds to protect their properties in case contractors don’t do a good job. If there are defects in the building – e.g. leaky pipes, cracks in the walls, unstable structures, etc. – that could cost the developer to suffer large losses.

Maintenance Bond coverage amounts are usually about 10% of the contract value. That’s just a very rough guide. For recommendations on specific coverage amounts, get in touch with us and we can go through your requirements in detail.

What other bonds are typically used alongside Maintenance Bonds?

Usually, Maintenance Bonds are combined with additional bond types to provide maximum protection to the client. Some of the most common bonds used include:

Project stage	Type of insurance bond required	Purpose of bond
Down-payment	Advance Payment Bond	Protects deposit money from being lost if the contractor is unable to start work or goes bust/missing
Physical works begin (e.g. construction, installation, etc.)	Performance Bond	Protects client from contractor not fulfilling their contractual obligations (e.g. providing sub-standard work)
Physical works end	Performance Bond
Post-completion	Maintenance Bond	Protects client from contractor not performing required repair works

When working on projects requiring manual labour, what other types of insurance are important?

For all projects that involve manual work, make sure to carry Workmen Compensation (WICA) Insurance to protect your employees. This covers your company against liability from work-related injuries and sickness. If your workers get hurt or sick on the job, you’re legally liable to compensate them for their injuries and sickness.

MOM legally requires all employees who perform manual work, or for any employee who is paid less than SGD 2,600/month, to be covered by WICA insurance. If any of your workers are foreigners, MOM also requires each worker to have I) $15,000 worth of Foreign Worker Medical Insurance (FWMI Insurance), and II) a $5,000 Foreign Worker Security Bond.
All contractors should also carry Contractor’s All Risk Insurance. A Contractor’s All Risk policy includes Public Liability Insurance, which will protect you from liability for property damage and injury liabilities to third-parties. For instance, if you accidentally damage neighbouring properties while excavating the ground or performing repair works, this will protect you ig you get sued. Contractor’s All Risk Insurance also covers damage that is suffered by your client’s property during construction, and also covers damage to your machinery and equipment. This is a comprehensive policy that is perfect for covering the major risks that contractors typically face.

Maintenance Bonds vs Performance Bonds

	Maintenance Bonds	Performance Bond
Purpose	Protect client against defective work	Protect client against contractor failing to meet contract requirements (e.g. performing shoddy work, providing faulty designs, etc.)
Common use cases	· Construction projects · Installation projects · Upgrading projects · Servicing projects	· Construction projects · Installation projects · Upgrading projects · Servicing projects
Bond structure	Usually on-demand	Either on-demand or conditional

How much do Maintenance Bonds cost in Singapore?

Maintenance Bonds usually cost around 1% of the insured value.

The quickest way to get a quote and have your bond issued is to send us an enquiry, so that we can begin working on your Maintenance Bond application right away.

With Provide, you save up to 25% on your premiums. Our digital operating model creates lower overheads, and we pass every dollar saved back to our clients.