Yes, I was expecting this terminology question to come up sooner or later. So:
The thing you are buying will be worth exactly 1.28 BTC 28 days from when you buy it. So in standard terminology 1.28 is the face value and it is a zero coupon bond. I should will go back and redo the OP to reflect this more standard terminology.
Now given that terminology I need to more exactly describe the insured value. Thinking about that now and I may be able to simplify the equation and description so please bear with me and I will get back to you all on that.
I have to go out now and I will get to all the other questions and concerns raised but I wanted to anounce this first:
The PPT stockholders voted on it and we have agreed to insure 25% of the face value of all outstanding bonds at all times against a Pirate default. The face value of the bonds is 1.28. 25% of that is 0.32. So in the case of a default you will be paid 0.32 for each bond. More later!
Even if you payout early? Or would that be 25% of (1.0 + 0.01*days)?