This type of cover is an agreement between principal (employer) and insurer, the insurer agrees to mitigate any losses he might encounter in the event of the contractor not being able to execute a contract.
TYPES OF BOND COVER AVAILABLE
- Advance Payment Bond: in order to assist contractors to perform their contracts promptly, principals grant fund of a specified proportion of the contract value as mobilization or advance payment. The aim is to ensure that the contractor is in fund to execute the project. If however the fund is not well utilized, the contractor would be held liable to the principal in which case the bond will be called up and the insurance company would have to take up the liability.
- Performance Bond: this is issued in favour of the employer to cover any losses he might encounter in the event of the contractor not being able to execute the contract to completion.
- Bid/Tender Bond: Is given to the principal to ensure that if the contract is awarded and the contractor could not take up the project, the cost of re-tendering the contract will be borne by the company [insurer].
- Customs Bond: this is security to the Customs & Excise authorities to the effect that dutiable goods in bounded warehouse will not get into local market with the attendant loss of income to the Customs & Excise.