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Bond Insurance

Bond insurance policy

Bond insurance can be seen as a form of "credit enhancement". Bond insurance is considered as a type of insurance plan that is designed to safeguard a business organisation from losses which may be caused due to some fraudulent activities by individuals or a group. Bond insurance is also known as an investment bond. It is an insurance which is related to investment that is primarily used as a financing mode. The bond insurance can be seen as an investment instrument which is offered by insurance companies in the form of long time or for a particular term bond insurance policy. Also, bond insurance has own tax advantages.

KEY TAKEAWAYS

  • Bond insurance is usually attractive for the investors who aim in estate planning and long term investing.
  • Policyholders of bond insurance receive regular dividends or bonus payments.
  • Investors who deny receiving regular bonus can receive their earnings to tax free after holding the bonds for more than 10 years.
Insurance Cover Image

What Bond Insurance Covers?

Bond insurance not only covers the business organisation against the fraudulent activities but also protects the clients who are at the receiving end of the business. This bond insurance policy covers the following areas:

  • Forgery : Copying of signature or unauthorized access of details and transfer of money from the business or customer account.
  • Asset theft : Stealing of some valuable assets from the business organizations.
  • Identity theft : Employees of organization may steal the identity details from the stored details of servers or may be the shared drives.
  • Embezzlement : Losses incurred because of fiddling of funds by organization employees.
  • Theft by customers : Claims that are made by clients if the employees steal money/valuables from them.

The primary benefits which are associated with bond insurance policy are seller or exporter can be potentially made accessible with full coverage. The seller is protected against the loss he may suffer because of some unfair calls by the importer on the bond or because of political events. Moreover, bond insurance helps to reduce the borrowing costs for an issuer because investors are prepared for accepting a lower interest rate in exchange for the credit provided by the bond insurance policy. Additionally, bond insurance helps in improving the market liquidity for the insured securities, surveillance of the related transactions and remediation of these transactions.