Bond insurance is protection for the lender against default. A premium for the insurance is paid for by the issuer of the Bond. Insurance companies commit to pay the principle and interest of a Bond if the issuer is unable to meet the requirements of the agreement. Some insurance companies deal exclusively with Bond insurance.
Bonds are often used in these types of businesses
- cleaning services
- and so much more
Classification of Bonds is made with regard to whether or not they are secured or unsecured, maturity rating, tax status, quality, and safety in terms of whether or not the issuer is financially reliable to repay the Bond. Bond Insurance, therefore, will correspond to the rating of the Bond and is calculated based on the risk of failure to repay the Bond. The only Bonds that are not usually insured are government Bonds, since the risk of failure to repay is negligible.
Bond insurance is protection for the lender against default.