What is a guarantee insurance and why might you be interested in it?
A warranty insurance is a policy that is used to guarantee the fulfillment of a contract or agreement, whether between individuals or companies. In this post, we explain what it consists of and why you might be interested in getting one.
How does warranty insurance work?
It functions as a form of financial protection in the event of breach of contract or agreement. The insured pays a premium to the insurer in exchange for a guarantee that covers the value of the guaranteed obligation in the event of non-compliance.
For example, if a company hires a contractor to build a building, it may require the contractor to take out warranty insurance. In the event that the contractor breaches the contract, the insurance company will cover the costs necessary to fulfill the contract, such as hiring another contractor.
Why might you be interested in getting warranty insurance?
Getting this insurance can be a good option for individuals or companies involved in agreements or contracts that require a guarantee. Some situations in which it could be useful are:
- Construction contracts: When a company hires a contractor to carry out a construction project, it may require the contractor to take out warranty insurance to ensure that the project is completed as agreed.
- Supply contracts: In some cases, suppliers may require buyers to take out warranty insurance to ensure that payments are made according to agreed terms.
- Tenders and public contests: In some cases, companies participating in tenders or public contests may require warranty insurance to ensure that they will comply with the terms of the contract if they win.
- Other contracts: Leasing contracts, service contracts, and other agreements may also require a guarantee to protect the parties involved.
What types of warranty insurance exist?
There are different types of insurance of this kind, each adapted to specific situations. Some of the most common are:
- Construction warranty insurance: Covers breach of contract in construction projects.
- Supply warranty insurance: Covers breach of contract in supply contracts.
- Tender warranty insurance: Covers breach of contract in tenders and public contests.
- Payment warranty insurance: Covers breach of payment in purchase-sale contracts and agreements.
Make sure to compare different options from insurance companies to find the policy that best suits your needs and budget.
