Three misconceptions out there about bonds insurance

Bonds insurance is an important type of insurance that those involved with investing need to understand. At R&R Insurance Group LLC, we can provide bonds insurance that protect investments in Quakertown, PA. Unfortunately, bonds insurance is sometimes misunderstood.

The following are three common misconceptions out there about bonds insurance:

Bonds insurance is the same thing as a surety bond.

One of the most important things to understand is that bonds insurance and surety bonds are not the same thing. Bonds insurance is a type of insurance coverage that the issuer of a bond may purchase to improve the reliability of a bond investment. 

Bonds insurance can occasionally be referred to as financial guaranty insurance. 

Bonds insurance is purchased by bondholders.

Another common misunderstanding about bonds insurance is that bonds insurance policies are purchased by investors. However, investors are not the ones who buy bonds insurance. 

Bonds insurance is actually typically purchased by the issuers of bonds. Investors themselves cannot purchase bonds insurance to reduce the risk involved in their bond investments. If a bond issuer offers bonds insurance, this makes bond investments more attractive to investors and can improve the credit rating of the bonds in question. 

Bonds insurance is only seen with asset-backed securities.

Bonds insurance is commonly associated with asset-backed securities. However, asset-backed securities are not the only type of investment that bonds insurance can be used with.

Companies that issue bonds might also use bonds insurance to make municipal bonds investments more risk-free and attractive to bond investors. 

Are you interested in bonds insurance?

You can contact us at R&R Insurance Group LLC for a quote on bonds insurance in Quakertown, PA.