What is the definition of Junk Bonds?

Junk Bonds are bonds that have low credit ratings, but provide a higher yield.

These bonds have a credit rating, which is equal to or less than BB. But, because the credit rating is lower than those of investment grade bonds and the risk is deemed to be higher, those who issue it provide higher rates of return to make it more attractive to the investors.

State insurance commissions usually pose a limit on the amount invested in junk bonds by insurance companies. This is because insurance companies have to be more liquid - the assets must be easily sold to pay for claims, especially after a disaster.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage