Surety and Title: Guaranteeing Performance and Securing the Ground
Faraday's read: surety and title insurance answer the two questions a lender loses sleep over. Will the contractor actually finish, and does the borrower actually own what it pledged. They are different instruments with different mechanics, but they do the same job: they remove a category of catastrophe that no amount of builder's risk touches. A fire policy will not help you if your contractor goes bankrupt at sixty percent complete, and it will not help you if a forgotten easement holder can block your substation. Surety and title fill exactly those blind spots.
Knowledge check
A builder's-risk policy is in force, yet the lender still insists on a performance bond and a title policy. What two distinct risks are the bond and the title policy addressing that builder's risk does not?
Show the answer
The performance bond addresses contractor non-performance or insolvency, guaranteeing the project gets completed if the builder fails. The title policy addresses defects in ownership, such as undisclosed liens, easements, or competing claims to the land and its rights. Builder's risk covers physical damage to the works, but neither a failed contractor nor a defective title is physical damage, so those risks require separate instruments.