YOU ASK:
What is the definition of Municipal Bond Insurance?
WE ANSWER:
Municipal Bond Insurance provides coverage in case the bond issuer is unable to pay for the principal provided by the investors, as well as the interest earnings of the bond. This is to protect investors who buy municipal bonds issued by government agencies.
The city, municipality or state releases these bonds, called munis, to raise money for its housing, infrastructure and development projects. And they protect the bonds they sell with municipal bond insurance so as to increase the credit ratings of the bond and thus make the bonds more attractive to investors. If the insurance is provided by an insurance company with a high credit rating, the municipal bond will also be given a high credit rating.
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