Bolster mints guarantee for remodeling projects

Innovative policy guarantees completion of projects at fixed price

From delays to bankruptcy, any number of contingencies can throw a wrench in construction projects.

That’s why the government and many commercial property owners often require construction companies to buy a guarantee that covers their completion. Homeowners, however, have never enjoyed access to that sort of insurance, forcing them to bite the bullet if their remodeling contractor mucks up a job.

Screen shot of getbolster.com home page.
Screen shot of getbolster.com home page.

Enter Bolster.

The online remodeling marketplace sells what it claims is the first guarantee to cover home remodeling projects on time and at an agreed-upon price.

“It eliminates all of the financial risk associated with remodeling a home,” said CEO Fraser Patterson.

The company, which has raised $2.3 million so far, doesn’t just sell the guarantee. Similar to Sweeten, it also matches consumers with contractors. (Most of Bolster’s partner contractors are based in New York City, but it has plans to expand its network other regions.)

Here’s how the process works:

1. A homeowner submits a remodeling project to Bolster.

2. Bolster connects the homeowner with three approved contractors who bid on the project.

3. The homeowner chooses a bid.

4. The homeowner attaches the bid to Bolster’s contract, and if she wants (the guarantee is optional), purchases the Bolster guarantee for 3 percent of the value of the project.

The guarantee covers a project’s agreed-upon price, time frame, quality of work and materials.

If the contractor messes up the project, Capitol Insurance Companies, the company backing Bolster’s guarantee, will hire a new contractor to finish the job or give the policyholder enough money to hire a contractor herself.

The policy also guarantees that a contractor will return to fix any defects for the first 12 months after completion of a project.

Bolster’s guarantee, if widely adopted, could quell some of the distrust and uncertainty that haunts the remodeling market.

Home remodelers sometimes charge more than the bids they make on projects, ambushing consumers with fat bills. Many also run into financial troubles, sometimes leaving their clients with half-finished projects.

Patterson saw an opportunity to guard against those situations by tweaking a guarantee commonly used in large construction projects known as a”surety bond.”

“We’ve re-engineered these instruments and made them accessible and affordable for every homeowner,” he said.

Construction companies purchase the bonds from insurance companies, who in exchange for a premium promise to fulfill a company’s contractual obligations if the contractor messes up.

The bonds are often legally mandated for many large public or commercial projects. And even when they’re not, commercial developers often require contractors to buy the bonds given the massive amount of money they stand to lose if they don’t deliver.

Insurance companies haven’t offered surety bonds for home remodeling projects, however, because they aren’t legally required. Plus, home remodeling projects are much smaller and the contractors that handle them are difficult to evaluate for insurance companies, according to Patterson.

But Patterson thinks he’s ironed out a guarantee and business model that will make covering remodeling projects actually profitable.

The main difference between Bolster’s guarantee and a traditional surety bond is that the consumer must buy the guarantee, not the contractor.

“Traditionally the contractor will liaise with the surety company and includes the cost of their bond in their bid; the customer still pays,” Patterson said. “With Bolster, we liaise with the surety company [and] the contractor includes the cost of our project guarantee in the customer’s bid, clearly showing the cost.”

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