The basis of the contract is the proposal form. Premiums must be paid upfront before commencement of cover. Premiums form the basis or the consideration for indemnity.
A bond is a financial guarantee. It compensates the third parties against loss suffered as a result of failure of the insured to perform the task described.
Some bonds commonly signed by insurers include:
• Performance Bonds- They are used when a contractor fails to complete a contractual work.
• Immigration/Security Bonds- They are issued to non-citizens whose conduct the insurer guarantees.
• Customs/Import Bonds- These guarantees that, dutiable goods on which duty has not been paid do not find their way into the local market before duty is paid. Duty has first to be paid before such goods are sold in the market.