Bond insurance is a type of insurance policy that a bond issuer purchases that guarantees the repayment of the principal and all associated interest payments to the bondholders in the event of default.In order to get a bond insurance, you must first determine whether you need a surety or fidelity bond.The important difference between the two is that surety bonds are required by a third party (usually the government) to protect itself or the public.

Fidelity bonds are insurance for you or your business.What is bond insurance for a business? It simply means that they have a business license, have the proper insurances and have made payments to a surety company for protection by a bond.The insurance company or surety company will be responsible for covering any financial losses.

Cost of a Bond Insurance You will generally pay 1-15% of the total bond amount.Your rate is often based off your personal credit score.For example, if you need a $10,000 surety bond and you get quoted at a 1% rate, you will pay $100 for your surety bond.

Higher risk bonds, like construction bonds, may cost 10% or more of the bond's value.-------------------------------------------------------------------------------------------------------------------------- The premium requested for insurance on a bond is a measure of the perceived risk of failure of the issuer.It can also be a function of the interest savings realized by an issuer from employing bond insurance or the increased value of the security realized by an owner who purchased bond insurance.

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