Insured Municipal Bonds

MUNI bond insurance can be bought for most MUNI bonds. This insurance guarantees that the interest and principal payments are issued on time and in full in the event that the issuing agency is unable to do so. In order to purchase insurance for MUNI bonds, most insurers require that the bond’s rating be high.

Bond insurance is used to increase marketability, increase security and to reduce the cost of capital / borrowing from the issuer.

While bond insurance protects buyers from default of payment by the issuer, it does not protect the market or trading price of the bond. Sold prematurely, bond insurance does not guarantee that the selling price will be equal to or above the original purchase price. MUNI bond insurance only guarantees the pre-arranged schedule of interest and principal at the time of maturation.