This policy provides a financial guarantee. An insurance bond will have three parties – the principal (owner of the bond), the surety (insurance company issuing the bond), and the obligee (the entity requiring the bond), this principal pays the insurance premium as compensation for insurance.
The various types of bonds are;
- Performance Bonds are used when a contractor fails to complete contractual work.
- Immigration/Security Bonds: They are issued to non-citizens before they are issued with work permits.
- Bid bonds/Tender Bonds: This bond ensures that on acceptance of a bid by the customer.
- Customs/Import Bonds: This guarantee that dutiable goods on which duty has not been paid do not find their way into the local market before duty is paid.