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What Is Bond Insurance: Purpose and Function

By Robin Hartill, CFPUpdated Sep 10, 2025 at 12:40 PM

Key Points

  • Bond insurance protects investors if the bond issuer defaults, ensuring missed payments are covered.
  • Insured bonds often receive higher ratings, reducing risk and allowing issuers to pay lower interest rates.
  • The cost of bond insurance can be offset by savings from lower interest rates if the insurer's rating is stable.

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