Insurance and Surety Bond

Often entrepreneurs have difficulty understanding what is required for obtaining a contractor’s license in insurance matters and again, the question that arises is whether this bond insurance will be sufficient to cover damage that could occur on a construction site … So, do we need Liability Insurance or a license bond?

The difference between Liability Insurance and License Surety Bond


The license surety bond is a financial guarantee that the entrepreneur obtains from an association, an insurance company or a financial institution to guarantee the performance of his contractual obligations towards his clients.

It aims to compensate any customer who has suffered damage due to the non-performance or execution of construction work and resulting directly from the down payments made, the non-performance of the work, manufacturing defects and defects discovered in the year following the end of the work.

The amount required is $ 20,000 for specialized contractors and $ 40,000 for general contractors.

The contractor’s obligation is straightforward in that he is required to repay any amount that the surety has paid on his behalf under the indemnity and guarantee agreement signed when the file was opened.

The license surety bond is intended to compensate any customer who has suffered damage after hiring a contractor for work, but it does not cover certain aspects such as:

  • Damage resulting from a delay in the execution of the works;
  • Complaints from people who took part in the construction work;
  • moral damages and punitive damages.


Companies in the construction industry are affected by several responsibilities, including civil liability. Indeed, in this area risks can arise at any time during the work, hence the interest of being fully insured.

The liability insurance policy protects the company against personal injury or property damage caused to the customer by the activities, products, or work of the contractor. This also covers damage attributable to advertising or personal damage as well as court fees that may be applicable for the defense.

Construction is a key sector of the Quebec economy, so it is normal for insurance companies to grab the juicy market. More so, since this environment brings together a multitude of professionals and trades with great responsibilities (engineers, carpenters, plumbers, electricians).

What is commonly called site insurance includes a multitude of insurances relating to the protection of property (all site risk insurance) and civil liability (overall site civil liability insurance).  Thus, several insurance policies can be added to the contractor’s civil liability, such as:

  • Liability for errors and omissions by the contractor;
  • Insurance against embezzlement, disappearance and destruction;
  • Insurance covering penalties for breach of contract;
  • Insurance covering installation risks;
  • Guarantee against defects.

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