Advance Payment Insurance protects a party making an advance payment for Capital Goods against the risk of non-performance or default by the recipient of the payment.

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This type of insurance is often used in international trade transactions where one party, usually the buyer, makes an advance payment to the seller before receiving the goods. The insurance policy provides coverage to the buyer in case the seller fails to deliver the agreed-upon goods, thereby safeguarding the buyer's financial interests.

 

Advance Payment Insurance can help mitigate the risk of loss associated with advance payments, particularly in situations where the seller's reliability or financial stability is uncertain. It provides assurance to the buyer that they will receive compensation if the seller fails to fulfill their obligations, reducing the potential financial impact of non-performance.