Municipal Bond Forum
Fully insured bonds
Q
Would you please explain to me what a fully insured bond is?
A
James A. Klotz responds:
Municipal bond insurers guarantee the timely payment of principal and interest on a tax-free bond. The insurance provides an additional layer of security to the bondholder. In the unlikely case of default by the issuer, the insurer has the option to continue payments on the original schedule or pay the full “face value” to the bondholder immediately.
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