A bond that guarantees the principal’s honesty.
Insurance Encyclopedia
Bond, surety
The financial assumption of responsibility by one or more persons for fulfilling another’s obligations.
Bonded goods
Dutiable goods in respect of which a bond for the payment of the duty has been given to Customs and Excise. See CUSTOMS AND EXCISE BOND.
Bonded value
Where goods are normally sold in bond, the bonded price is considered to be the ‘gross value. However, The Marine Insurance Act 1906, s.71(4) defines gross value as the wholesale price or estimated value ruling on the day of sale after freight, landing charges and duty have been paid.
Bonded warehouse
An approved warehouse for goods upon which excise duty has not been paid. The warehouse owner becomes the subject of a government bond, i.e. a general or warehouse bond or a removal bond. This guarantees payment of the duty to HM Customs & Excise in the event that goods removed from the warehouse without payment of the duty. are
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A Warehouse storage area of manufacturing facility in which imported goods may be stored or processed without payment of customs duties.
Bonding
An insurance contract by which, in return for a stated fee, a bonding agency guarantees payment of a certain sum to an employer in the event of a financial loss to the employer by the act of a specified employee or by some contingency over which the employer has no control.
Bonding Company
A company approved by the Regulator for the issue of bonds such as those necessary to effect the release a ship from arrest. (U.S.).
Bonds (investment/insurance)
Single savings contracts issued by insurance companies. They are collective investments that create a fund whose manager aims to secure growth. An increase or decrease in the value of the fund is reflected in the value of the investors’ units. The fund is treated differently in terms of taxation from unit trust funds as most taxation (income tax and capital gains) takes place within the fund. These single premium bonds are either: income/distribution bonds; with profits bonds; equity bonds (investing exclusively in company shares); managed bonds (spread risk by investing in shares, gilts and property).
Bonds (securities)
Fixed interest securities issued by governments (gilts), financial institutions and companies (corporate bonds) to investors. The issuer pays a fixed rate of interest for a fixed number of years (e.g. 7.5 per cent for five years), at the end of which the capital is repaid. Bonds are traded in the open market in the same way as shares. Insurance companies and pensions funds are substantial investors in UK government bonds. Distinguish BONDS (SURETY BONDS) and BONDS (INVESTMENT INSURANCE).
Bonds (surety bonds)/construction bonds
A surety bond involves three parties, a surety, a principal (often a contractor) and an obligee (often a project owner). The surety guarantees under seal that the principal will carry out his obligations or alternatively compensate the obligee for losses due to the contractor’s breach. In the construction industry this is known as a performance bond. The surety has recourse against his principal (the obligor). A retention bond is required when the developer releases the amount retained for defects before the contractor has completed the defects. A pre-payment bond guarantees any advance payment for the contractor’s mobilisation. Bid bonds guarantee that the contractor’s bid or tender is made in good faith and he is capable of entering into the contract. If the contractor fails to proceed, the surety pays for the project owner’s costs in scrutinising another tender. Payment bonds guarantee payment for project labour and materials. See COURT BONDS; LOCAL AUTHORITY BONDS; GOVERNMENT BONDS.