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Bond Insurance

An insurance bond is a contract between three parties—the principal (issuer or owner of the bond), the surety (insurance company issuing the bond) and the obligee (the entity requiring the bond)—in which the surety financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond. For this guarantee, the principal pays the insurer premium as compensation for insurance.

What Bond Covers

bond is an obligation of the surety company (the company issuing the bond) to protect one person against financial loss caused by the acts of another. Dishonesty Bonds protect a housekeeper, maid, or janitor against claims that the housekeeper stole or broke a client’s property.

How Does Bond Work

By being a guarantee for the repayment of the principal and all associated interest payments to the bondholders in the event of default.

Types of bonds

Why Bond Insurance

Bond insurance protects borrowers from default by the issuer by guaranteeing repayment of principal and sometimes interest. 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.
 contractors are also a lot more trustworthy. That’s not just because you have some guarantee in case something goes wrong – it’s because an insurance company trusts the contractor. … You always knew why you wanted a company to be bonded, licensed, and insured – it means security.