Subcontractor Default Insurance (SDI)
An alternative to traditional subcontractor bonding where a general contractor purchases its own insurance policy covering the cost of a subcontractor default across its whole project portfolio, rather than requiring each individual subcontractor to carry its own bond.
Why it matters
SDI shifts the qualification process onto the GC's own policy rather than a surety's underwriting of each individual sub, which means the GC's insurer, not a bonding company, sets the rules for which subcontractors actually qualify for coverage.
On a real project
A general contractor that regularly self-performs risk management purchases an SDI policy covering subcontractor default across its entire portfolio of active projects, instead of requiring bonds from each individual subcontractor.
Who this matters most to
A Risk Manager evaluates whether SDI or traditional bonding fits a given project, since SDI shifts the qualification process and the cost structure onto the GC's own insurance program.
Where this goes wrong
A GC relying on SDI instead of individual subcontractor bonds doesn't realize the SDI policy carries its own per-subcontractor qualification and reporting requirements, skips properly prequalifying a subcontractor the policy would have required vetting, and finds that subcontractor's later default isn't actually covered.