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Municipal Bond Insurance |
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The insurance policies written by municipal bond insurers guarantee that interest and principal will be paid as scheduled, should the issuer default. Each guarantee is unconditional and irrevocable and covers 100% of interest and principal for the full term of the issue. A bond may be insured in the primary or secondary market.
While many investors are aware of the protection municipal bond insurance offers against default and downgrade, they may not realize it also shields them from other risks as well. These may include, for example, natural disasters (earthquakes, floods, tornadoes, etc.) and environmental hazards.
If an insured bond defaults, the insurer would immediately step in and make the scheduled payments. As an investor, you would not experience any interruption in the timely payment of income.
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