Business Line Insurance
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. Bond issuers buy insurance to enhance their credit rating to 'AAA' in order to reduce the amount of interest that it needs to pay. Once bond insurance has been purchased, the issuer's bond rating will no longer be applicable and instead, the bond insurer's credit rating will be applied to the bond instead. By design, bondholders should not encounter too much disruption if the issuer of a bond in their portfolio goes into default. The insurer should automatically take up the liability and make any principal and interest payments owed on the issue going forward.
Why do I need a surety bond for my business?
- As a business owner, you may need a surety bond to guarantee payment for state sales taxes or utility bills. Or as a contractor, you may need to post a license or permit bond to guarantee your work for licensing requirements with municipalities.
- Attorneys may have clients that are required to post court bonds such as administrators or executors bonds to guarantee their performance while distributing assets in estate situations.
- Notary publics are required
to post bonds in most states.
Types of Surety Bonds