Advance Payment Bond:

This is guarantee from the insurance company to the principal (usually refereed to as the Employer) that the contractor (Insured) would perform the contract for which the said payment has been made, failing which the insurer guarantees the payment of the said sum of money to the principal.

Performance Bond:

This policy provides a guarantee from the insurers to the principal that the contractor (insured) will perform the contract for which a said amount has been agreed to be paid (or has been paid) for the execution of the said contract.  Usually the validity on the Bond tallies with the execution/delivery date of the contract and the insurer can be held liable in the event of non-execution/delivery of the contract.

For the purpose of executing a Performance/Advance Bond, the insurer may require the contractor's Certificate of Incorporation, Memorandum and Articles of Association, copy of Financial Statement and evidence of past performance.

Credit Bond:

This Credit Bond is a form of Guarantee provided by an insurance company to the principal (usually referred to as the creditor); that the person or persons to whom credit facility (money or material) was granted; would perform the obligation for which the said credit facility has been granted. Failing which the insurer guarantees the payment of the monetary value of the credit facility to the creditor or principal.

Credit Bond is a commercial risk normally treated by insurers as special risks business. The antecedent of commercial crime associated with credit bond has resulted in the refusal of most insurance companies to guarantee credit bond. Few insurers would however issue credit bond based on the merit of the insured. Premium rate for credit bond in Nigeria ranges between 3% and 5% negotiable on the strength of the prevailing market environment and past records of the insured.