Types of Bonds and Guarantees

Advance Payment Bonds

Guarantees to an employer that in the event a contract is unfinished any payment made in advance of completion can be recovered under the bond.

Bailiff Bonds

Guarantees to the Court that a Bailiff appointed by them carries out his duties under the Distress of Rent Rules and Council Tax regulations. Normally a bond of £10,000 is required.

Bid Bonds

These guarantee that if a contractor makes the lowest tender for a contract which is accepted by the employer, and the contractor pulls out, the Surety will pay the difference between the original tender price and the next highest price.


Carnets are international customs documents issued by Chambers of Commerce that enable the temporary importation of specified goods free of customs duty, taxes. e.g. exhibition samples, concert and sporting equipment.

Court Bonds

Guarantees required by the Courts to provide a guarantee against dishonesty. E.g. receivers appointed by the Court of Protection / Public Guardianship Office.

Duty Deferment Bonds

If you are importing goods into the UK, you may have to pay H M Customs & Excise Duty and VAT at the point of entry. However, you are unlikely to have received payment from your customers at this point, thereby creating potential cash flow issues.

These guarantees cover the payment of Duty & VAT due to H M Customs & Excise which provides them with protection against payment default or company insolvency. The Duty Deferment Guarantee allows for payment of Duty and VAT to be deferred for up to 45 days, which will take you closer to the time when you can expect to be paid by your customers. This is possible because the guarantee protects the interests of H M Customs & Excise for outstanding Duty and VAT in the event of default or your insolvency.

Main features:

  • Payment of Duty & VAT deferred by up to 45 days
  • Guarantee available on a 12 month ongoing facility basis
  • Provides cover against UK domestic risk
  • No collateral security required, only a standard counter indemnity
  • Premium is payable prior to issue of the guarantee
  • Up-to-date management accounts & annual accounts required


  • Frees up cash flow
  • Does not compromise bank overdraft facilities
  • Straightforward solution with minimal administration
  • No Insurance Premium Tax applies

Environment Agency Bonds

Waste Management Bonds, which require compulsory renewal every 3 years. Can only come off risk when released or by full payment of amount guaranteed.

Financial Guarantees

Guarantees of financial payment requiring the Surety to provide payment of monies in the event that the principal fails to do so.

Insolvency Practitioners (IP) Bonds

Before he / she can be appointed to manage any insolvency, an IP is required to have a licence bond that effectively represents a facility. A specific bond is required for each appointment. The maximum potential exposure is £25m.

Intervention Board Bonds

Bonds to ensure that subsidised meats or other agricultural produce is exported to non EU countries after processing.

Land Purchase Guarantees

Guarantees in respect of the payment of deferred consideration for the purchase of land.

‘On Demand’

Payment required where demand is made without ascertained or established damages and/or breach of contract. (These tend to be offered by banks as surety and insurers will generally be cautious about unconditional bonds).

Performance Bonds

A bond to secure the performance of any contract or contractual obligation. Usually 10% of contract value.

Restoration Bonds

Guarantees of restoration of landscapes following the extraction of minerals.

Retention Bonds

Bonds allowing the employer to release retained monies held under a contract to the contractor thus improving the cash flow of the contractor.

Street Work Bonds

Guarantee the completion and maintenance of highways until adopted by the Local Authority. Typically required from the developers of new estates.

Travel Bonds

Required by some travel agents as a prerequisite to joining ABTA, ATOL or CPT. Covers the cost of the travel agents obligations to holidaymakers in the event of insolvency.

Warranty Bonds

Guarantee covering a warranty. In the context of the construction industry – NHBC.


For further information or to discuss, please contact our Insurance Solutions specialists on +44 (0) 203 096 2830 or email info@sginsurance.co.uk 

Please wait...