When buying bonds—like corporate or government bonds—you usually don’t need insurance for the bonds themselves. Bonds are generally lower-risk investments. Their value depends on the issuer’s ability to pay back the money they owe.
Still, there are situations where insurance can help protect your overall investment strategy. Some types of insurance can cover risks beyond the bond itself. These policies are useful for investors who want to protect their entire portfolio, not just a single asset. Here are a few types of insurance to consider:
Portfolio Insurance
Portfolio insurance protects your total investment portfolio. It helps reduce losses during market downturns. If the market crashes or becomes very volatile, this coverage can soften the impact. Investors often use it as a form of risk management. It’s especially helpful for those with large or diverse portfolios.
You can get portfolio insurance through certain financial institutions or investment managers. Some use options and other financial tools to limit your downside risk. Others offer more traditional insurance-style policies. Talk to a financial advisor to find out what kind of protection fits your needs.
Custodial Insurance
If you hold your bonds in a brokerage or with a custodian, custodial insurance is important. It protects your assets if the custodian makes a mistake or acts dishonestly. For example, if your custodian mishandles your funds or commits fraud, this insurance can help you recover your losses.
Many brokerages already carry custodial insurance, but it’s a good idea to ask. Make sure your provider is insured and find out what their policy covers. Some policies protect against theft, cybercrime, and employee misconduct.
Professional Liability Insurance (for Advisors)
If you rely on a financial advisor, insurance becomes even more important—especially for them. Advisors and brokers should carry professional liability insurance. This is also known as errors and omissions (E&O) insurance.
It protects you if the advisor gives bad advice or makes a mistake that leads to a financial loss. If your advisor recommends a bond that turns out to be risky or unsuitable for your goals, and you lose money, this insurance may help cover your losses. It’s not a policy you purchase yourself, but it’s smart to work only with advisors who carry it.
Cybersecurity Insurance
Most investing now happens online. That creates new risks. Hackers and cybercriminals can try to access your accounts, steal personal data, or move your money without permission. Cybersecurity insurance can help protect against these threats.
Some policies cover direct losses from hacking. Others cover the cost of identity theft recovery or legal fees if your information is misused. If you manage your own investments or use digital platforms, this insurance can add valuable protection.
Final Thoughts
You don’t need insurance for bonds the way you might need it for a car or a house. But that doesn’t mean you should ignore insurance altogether. A strong financial plan includes ways to manage both market and non-market risks. Portfolio insurance, custodial insurance, and cybersecurity coverage all offer peace of mind. They can help you stay protected in a world where both market conditions and technology are constantly changing.
If you’re working with a financial advisor, ask about what protections are in place. If you’re managing your investments yourself, take time to understand how your assets are safeguarded. Planning ahead helps you avoid surprises—and protects the wealth you’re working hard to build.