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Bond insurance, also known as "financial guaranty 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.
A state guaranty association is not a government agency, but states usually require insurance companies to belong to it as a condition of being licensed to do business. The guaranty associations of the fifty states are members of a national umbrella association, the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA).
The first corporate surety, the Guarantee Society of London (whose insurance business ultimately merged into Aviva), dates from 1840. [4] [5] In 1865, the Fidelity Insurance Company became the first US corporate surety company, but the venture soon failed. [citation needed]
However, if you choose this kind of mortgage guarantee, be ready to pay two insurance premiums: one premium paid upfront that’s equal to 1.75 percent of the loan principal and an annual premium ...
State laws require that all licensed property and casualty insurance companies belong to the guaranty funds in every state where the companies are licensed to do business. A guaranty fund system also exists for the life, health, and annuity insurance industries, but operates independently from the property and casualty system.
In insurance law, it refers to a promise by the purchaser of an insurance about the thing or person to be insured. [ 3 ] In contract law, a warranty is a contractual assurance given, typically, by a seller to a buyer, [ 4 ] for example confirming that the seller is the owner of the property being sold. [ 5 ]
A personal guarantee, by contrast, is often used to refer to a promise made by an individual which is supported by, or assured through, the word of the individual. In the same way, a guarantee produces a legal effect wherein one party affirms the promise of another (usually to pay) by promising to themselves pay if default occurs.
A capital guarantee product means that when an investor buys, or "enters", this specific structured product he is guaranteed to get back at maturity a part or the totality of the money he invested on day one. Examples of capital guarantees include bond plus option, usually bond plus call, and constant proportion portfolio insurance.