Bond insurance (also known as "financial guaranty insurance") is a type of insurance whereby an insurance company guarantees scheduled payments of interest and principal on a bond or other security in the event of a payment default by the issuer of the bond or security.
Categories of Bonds
PERFOMANCE BOND Covers against losses or damages to a principal resulting from the inability by the insured (contractor or service provider) to perform as per the terms of a signed contract.
CUSTOM BOND It vary in nature but they all guarantee payment of duty to Tanzania Revenue Authority (TRA) in case the insured fails to meet the conditions upon which a waiver of duty was granted.
For instance a custom bond can be taken when importing goods to be used for certain work and duty is not paid on the understanding that the finished product will be re-exported. Another example is of a contractor bringing construction machinery for a project and then taking them back after the project.
SECURITY BOND It is issued to expatriates against the cost that the government may incur in case the person is deported from Tanzania