1) Type of insurance 
Bond insurance (also known as `financial guarantee insurance`) is a type of insurance whereby an insurance company guarantees scheduled payments of interest and principal on a bond or other security in the event of a payment default by the issuer of the bond or security. As compensation for its insurance, the insurer is paid a premium (as a lump.....
An optional policy purchased by the issuer to insure timely payment of principal and interest to bondholders.