General contractors, they must have life insurance.

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PostPosted: Thu Dec 20, 2007 3:20 am   Post subject: General contractors, they must have life insurance.  

Did you know all commercial contractors they need to have life ins.. This is a requierment by their bonding company. This is just incase if they die at the middle of the project.



Has anybody approch them to sell life ins. to them. I think if you have good term ins that you can sell them you are in a good position with them!



Has anybody has any experience with them?



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PostPosted: Thu Dec 20, 2007 3:30 am   Post subject:   

I know nothing about life insurance but cannot see that this would be true. Life insurrance would be paid to the contractors befeficiary... not to the party they were working for. So why would a bond carrier care about life insurance? Anyone doing a job could die in the middle of it. Everyone is not required to carrier life insurance.



As always... I could be wrong.

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PostPosted: Thu Dec 20, 2007 11:36 am   Post subject:   

I agree with tcope, first that I don't know squat about life insurance...but would hazard a guess that this may be a state issue to make sure that there is money to pay his vendors and subs...but again not sure how the bonder would come into play other than to make sure ''they'' arent' the only ones paying...... Confused

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PostPosted: Thu Dec 20, 2007 2:52 pm   Post subject:   

To answer your question: The general contractor has to buy life insurance and have his company to be at least part of the beneficiary, so that bonding company can come and finish the jobs he has insured.



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PostPosted: Thu Dec 20, 2007 4:50 pm   Post subject:   

A bond ensures that the contractor will complete the work on-time and for the stated amount. If the contractor dies, I'd think a valid claim could be filed against the bond. As such, the bond would address this type of situation... so why would life insurance be needed? If the money from a life ins. policy went to the remaining owners of the CG's company, how would this change anything? Are you saying the proceeds from the life policy would need to be given to the bond company (I don't see this as enforceable anyway)? If so, what good is a bond if the life policy is going to pay the claim anyway?

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PostPosted: Fri Dec 21, 2007 1:20 am   Post subject:   

Life insurance policy for General Contractors are required by the bonding companies, for the following reason:

In case of death for the owner of GC company, the bonding company will use the life money to expend for finishing outstanding contracts, left behind by the deceased GC.

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PostPosted: Fri Dec 21, 2007 2:00 am   Post subject:   

So what would the purpose of the bond policy be... if it's the life insurance policy that would pay? Beside that, if the GC's family or even the business get's the life money, there is no way for the bond company to make them complete the job or to pay that life money... it's not the bond companies money and they would not have a legal way of obtaining it.

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PostPosted: Fri Dec 21, 2007 2:26 am   Post subject:   

The life insurance purchased by the GC, the beneficiary to the policy, is the corporation.

a general contractor is to make, the benefoiciary, part the family and part the company.

we are familiar with the subject matter, because my husband & I have been in the business of general contracting for 20 years.

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PostPosted: Fri Dec 21, 2007 10:38 am   Post subject: I don't understand this either  

I don't understand either, why the bonding company (in effect) would be the bene. of the life policy...are we sure this isn't a pecular state law? Not that it isn't true just that it makes no common sense...Why not just have a higher bond? I thought that bonding insured deligent care of property and money not necessarily owned by the bondee....i was bonded when we owned a bait and tackle shop, because i sold fishing/hunting permits and had to send the conservation dept their money..so if i ran off with the money then the bond would've had to pay them....i totally get partners requiring large life policies but not the bonding companies...."a general contractor is to make, the benefoiciary, part the family and part the company." OP does it say this in the policy? and what percentage? It seems like a rip off to me the bonding company gets away with using the proceeds of a life policy? and the bond is for a certain amount anyway right? wouldn't they just pay that amount and be done with it?



OP please don't misunderstand we aren't challenging your experience

Quote:
we are familiar with the subject matter, because my husband & I have been in the business of general contracting for 20 years.
it's just from a legal and insurance stand point it's just not making sense to us....and we both freely admit to limited knowledge in the life insurance area...ok?



Where are our agents, and ins. teacher we need you dude! I've sent ins teacher a pm and hopefully he will have time to comment and maybe clear this up for tcope and i ....since we are having so much difficulty understanding this premise. Confused
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PostPosted: Sat Dec 22, 2007 1:32 am   Post subject:   

I beleive i have been totally misunderstood. a bonding company in an in



direct way requires a general contractor to purchase a life policy, with the understading that portion of the benefit goes to the corporation, and other portion to the family of the deceased owner, in this case the owner of the general contracting corporation, wether "C" or "S" corporation. the portrion for the corporation will be used to finish the uncompleted contracts, which was left behind by the deceased CEO, owner, or president of the subject company.

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PostPosted: Sat Dec 22, 2007 1:59 am   Post subject:   

No misunderstanding. No one can legally make anyone spend the life insurance money to complete the work. This would not be legal.



Also, many CG's are self employed or their relatives have no interest in the CG's "company". So again, no one could make these people spend the proceeds of the life policy on anything.



Lastly, we have been saying that he _purpose_ of a bond is to ensure that the work is completed and completed on time. What good is spending money on a bond when the bond company would make the CG get a life policy that would take the place of a bond? This makes no sense.



I've not been able to find any information showing that a GC needs a life policy to get a bond.

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PostPosted: Sun Dec 23, 2007 2:52 am   Post subject:   

A bonding company is an isurance enterprise, who is in the market to make money, not to lose any money. they charge, depending on the credit and financial stability of the contracting company,,b a fee of .012 percent to .019% of total cost subject project to ensure a G.C. Therefore, they want to act very conservatively for not losing any money. Also, needless to mention that, a bonding company, always asks indemnity agreement from the owner& it's spose, if applicable. That makes them secured if the spouse owns anything for recovery.


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PostPosted: Wed Jan 02, 2008 8:09 pm   Post subject:   

OK...let's clear up some things. I have been asked by a senior member to reply to this post and see if we can find some intelligence here. I'll do my best...



First of all...bonding is NOT insurance in any way, shape or form. Bonding is nothing more than AN EXTENSION OF CREDIT, if you really look at it properly. This is why, for example persons with bad credit CANNOT get bonded.



Bonding is primarily a performance guarantee. There are many types of bonding situations out there: contractor bonds, jail bonds, fiduciary bonds, ad nauseum...



Since we are talking about a construction contractor's bond, let's continue from there. Almost every state requires that all contractors have both liability insurance AND bonding to a certain minimum coverage level. Additionally, most states are now also requiring licensure for construction contractors. Specifically concerning the bonds: these are bonds that will guarantee the performance of the contractor up to the limits in the bond: finishing work, purchase of materials billed to the customer and a number of other concerns. Again, since we are basically talking about an extension of credit, let's look at a scenario-->



Contractor "A" has walked off a job right in the middle of completing his work and has left the customer in the lurch. It had nothing to do with the customer paying his bills to the contractor. The contractor just left an unfinished job and gained an unhappy customer. So, what now?



The bonding company is commonly referred to as the "avenue of last resort." Normally, the customer has to jump through a number of hoops before the bond will actually pay, and the customer may have to even SUE (rare, but it occurs) the contractor before the bonding company will pay the customer for the LACK of performance.



Assuming the customer has completed the requirements as laid out by the bonding company, then the company will pay the loss up to their limits as shown in the bond. Then comes the fun part: the carrier will now go after the contractor to recover the monies that they have paid the customer! Remember--- it's an extension of credit and NOT insurance!



Finally, to address the "life insurance" question that came up in the OPs question.



I have been dealing with bonding in it's manifold shapes and forms for more than 15 years and HAVE NEVER ONCE IN MY LIFE seen the scenario posed by the OP.



Frankly, life insurance and bonding have NOTHING in common with eachother. I do NOT see the necessary relationship here, nor have I ever seen a producer relate the products in the sense posed in the question. So, my answer is:



I AIN'T BUYIN' IT! Now, I will be the first to say that I don't know every law in every state (I'm getting there lol), but this would seem to be contradictory in every sense of the insurance world. Remember: bonding DOES THIS and there would be (IMHO) NO NEED for anything additional.



The life insurance could be used to pay off remaining debts of the now dead contractor (aside from the bonding needs), but I can't say that I have ever seen it made as a requirement for contractor's in ANY state.



Not exactly sure if this response did anything but confuse people...but hopefully it made certain things clear...



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PostPosted: Thu Jan 03, 2008 11:07 am   Post subject:   

Quote:
OK...let's clear up some things. I have been asked by a senior member to reply to this post and see if we can find some intelligence here. I'll do my best...
THANK YOU THANK YOU AND THANK YOU AGAIN!



I knew you would be able to clear this up for us! It's basically what we thought, (bonding).....can't thank you enough for looking at and responding to this thread.........


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PostPosted: Thu Jan 03, 2008 5:41 pm   Post subject:   

Well, I could also be wrong as there are numerous ways of getting around things. My hubby worked in commercial contruction yrs ago. He never had a bonding company or life insurance, he did had liability insurance though.That I beleive was supposed to take care, somewhat of the business.

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