What Is an Insurance Backed Guarantee (IBG) and Why Is It Important for Your Project?

When embarking on a building or renovation project, protecting all parties involved is crucial. One of the most effective tools for this protection is an Insurance Backed Guarantee (IBG), a key feature often required by Structural Warranty Providers. In this blog, we’ll explain what an IBG is, why it’s important for your project, and how it provides peace of mind for contractors, developers, clients, and warranty providers alike.

What Is an Insurance Backed Guarantee?

An Insurance Backed Guarantee (IBG) is an insurance policy that backs the guarantee provided by the contractor for both workmanship and materials. Essentially, if something goes wrong and the contractor has ceased trading, the IBG provides comfort that the financial recourse under the guarantee is still active. This type of policy is commonly used in the construction industry, for works such as piling, flat roofs and tanking. These elements are commonly not included within a structural warranty.

Why Are IBGs Important?

IBGs provide a vital safety net for clients and contractors in industries where businesses may fail before the guarantee period ends. Even if a contractor becomes insolvent, an IBG ensures the customer’s guarantee remains intact, giving clients recourse to resolve issues like defective workmanship or faulty materials. Without an IBG, clients could face significant repair costs without any coverage.
For contractors and developers, offering an IBG demonstrates professionalism and commitment to quality. It also shows confidence in their workmanship, as they are willing to back it with third-party protection. Importantly, structural warranty providers often require contractors to offer an IBG. This requirement ensures that the warranties and guarantees provided are backed by an additional layer of protection, safeguarding against potential financial loss should the contractor cease trading, bringing comfort to the end user.

Key Benefits of an Insurance Backed Guarantee

• Peace of mind: Clients know their investment is protected, even if the contractor goes out of business.
• Financial security: The IBG covers repair costs for defective work, preventing large out-of-pocket expenses for clients.
• Credibility: Contractors who offer IBGs show they are trustworthy and committed to high standards.
• Warranty Compliance: Many structural warranty providers and trade associations require IBGs, ensuring that consumers are protected in case of insolvency of the contractor.

What Is Insured?

An IBG backs the guarantee of workmanship and materials provided by the original contractor. If the contractor ceases trading and there is a valid claim under the guarantee, the IBG will pick up the financial liability. This offers essential protection, especially for projects such as roofing, etc.

What Is Not Insured?

There are some important exclusions under the IBG policy:

• Disputes with a contractor who is still trading.
• Consequential losses that arise indirectly from the work.
• Defects not covered by the contractor’s original written guarantee.
• Any remedial work carried out without the insurer’s consent.
• Performance guarantees related to efficiency, financial incentives, or grants.
• Maintenance packages are also not covered.
Are There Any Restrictions on Cover?
• Excess Amount: The policyholder is responsible for the excess specified in the certificate of insurance.
• Duration: The period of coverage cannot exceed the length of the contractor’s guarantee and may be shorter.
• Consent for Work: Insurers may refuse to cover remedial work done without their prior approval.
• Claim Limits: The amount recoverable is limited to the contract value listed in the insurance policy, regardless of how many claims are made.

How Long Do IBGs Last?

The duration of an IBG is tied to the contractor’s written guarantee and can last anywhere from a few years to 10 or 15 years, depending on the nature of the work. For example, roof installations or structural work may be backed by a 10-year IBG, ensuring long-term protection for both the contractor and the client.

Why Are IBGs Required by Structural Warranty Providers?

Structural warranty providers call on IBGs for comfort of the future owner. An IBG ensures that if the contractor is no longer available, the warranty provider has recourse through a third-party insurer, making sure the project is safeguarded. This requirement offers an additional layer of security, giving homeowners, developers, and investors’ confidence that elements, such as flat roofs, that fall outside the warranty, still provides protection for the end user.

Why Choose Granite Building Warranties for Your IBG Needs?

At Granite Building Warranties, we recognise the importance of reliable protection for contractors, developers, and clients. Insurance Backed Guarantees offers coverage tailored to your project’s specific needs.