Definition of Bond insurance:
Bond insurance is sometimes also known as financial guaranty insurance.
Commitment by a third party (usually an insurance company) to pay interest and principal installments due on a bond in case the bond issuer defaults.
Bond insurance is a type of insurance policy that a bond issuer purchases that guarantees the repayment of the principal and all associated interest payments to the bondholders in the event of default. Bond issuers will buy this type insurance to enhance their credit rating in order to reduce the amount of interest that it needs to pay and make the bonds more attractive to potential investors.
How to use Bond insurance in a sentence?
- Bond insurance is most commonly seen among municipal bonds and asset-backed securities.
- Issuers of bonds that purchase this type of insurance can receive a higher credit rating on those bonds as a result, making them more attractive to some investors.
- Bond insurance protects borrowers from default by the issuer by guaranteeing repayment of principal and sometimes interest.
Meaning of Bond insurance & Bond insurance Definition