Contract Performance Incident
In some cases, contractors demand interim payments earlier than agreed and then vanish. Others go bankrupt or default mid-project, halting work.

Additional Work Incident
After hiring the lowest bidder, you may find actual costs exceed estimates and extra fees are demanded. If you refuse, work is stopped until you pay more.

Defect Repair Incident
Upon completion, doors failed to close properly. When the client requested defect repairs, the contractor repeatedly postponed visits, forcing the client to hire another firm at additional expense.

In such cases, you can cancel the contract entirely and claim the full insured amount under the warranty policy.

Construction Mutual Aid Association
To guard against these incidents, guarantee institutions like the Construction Mutual Aid Association issue performance bonds and defect repair bonds for the interior industry. Membership requires ₩150 million in paid-in capital, so mostly mid-to-large contractors qualify. If an incident occurs, the association either completes the work itself or pays compensation, making it more secure than other options. However, fees can be high for small projects, so many firms instead obtain bonds through Seoul Guarantee Insurance.

Seoul Guarantee Insurance
As the country’s largest comprehensive guarantor, Seoul Guarantee Insurance (backed by the Deposit Insurance Corporation) issues bonds without requiring a construction license or capital, allowing even small contractors to participate. Premiums are typically lower, but coverage amounts are smaller—compensation is limited to 3–10% of the contract value without completing the work.

Contractors with low credit ratings or past claims face higher insurance rates. Some private firms may ask clients to pay these premiums themselves. A 1% rate indicates a reliable firm; 2% is acceptable, but 2.7% suggests a history of incidents. You can verify the rate on the insurance policy.
Warranty insurance is only available to registered businesses, so unlicensed firms cannot obtain it. If a contractor asks you to pay insurance fees or is blocked by a guarantor association, it likely indicates multiple past defaults—avoid such firms. If you must hire one, insist on a notarized performance guarantee letter before proceeding.