Lost Instrument Bond

Lost instrument bonds protect against the loss of a financial instrument such as a deed, a certificate of deposit, or a cashier's check. When such an instrument is lost and you request that the issuer replace the original, there must be some guarantee to the issuer that it will not lose money if the original eventually resurfaces.

That guarantee will often take the form of a lost instrument bond, which serves as a protection to the issuing party that it will not suffer losses when the lost check or other document is found. In the case where you have lost a check and purchased a bond, and then the original check is found, you would need to take that check to the issuing organization and simply turn it in. Failure to do this could cause a claim to be made against the bond by the issuing company, and you would eventually have to pay this amount.

What are the types of lost instruments?

There are many objects which can be considered lost financial instruments, including a cashier's check. However, there are several other objects as well which can be bonded under the lost-instrument bond umbrella, such as promissory notes, municipal bonds, corporate bonds, life insurance policies and real estate certificates.

When any of these financial documents are lost or destroyed, you can seek to have it restored by the issuing organization, at which time it would be a good idea to purchase a lost instrument bond. It's possible that the issuing organization would require you to purchase the lost instrument surety bond so that it can be protected against potential losses if the original were to be found.

How much do they cost?

The costs are determined by the organization that originally issued the document, typically an amount equal to 1.5 times the value of the certificate or document that was lost. The cost to the bond purchaser will amount to a one-time premium representing the degree of risk taken by the surety company in underwriting the bond.

A fairly typical cost guideline is $20 for every $1,000 of value of the lost instrument. If a promissory note for $50,000 was lost, you would probably have to pay in the neighborhood of $1,000 to the surety company to purchase a bond covering the amount of the certificate. It's also possible that the amount charged to you for the surety bond could be higher if your credit score is less than ideal because that would constitute a greater risk for the surety company. However, when amounts of less than $5,000 are involved for the loss of a financial instrument, you can expect that the cost of this bond will be set at $100.

How do I purchase a lost instrument bond?

Before any kind of bond can be purchased, the object in question must have been lost for at least 30 days, and after that time has expired, one of two types of lost instrument bonds may be purchased. The first type is known as an open penalty surety bond, which is issued when the lost instrument's value can increase or decrease, as is the case with stock certificates.

The other type is known as a fixed penalty surety bond, and this, of course, would apply to cases where the value of the lost document is fixed, such as with a certificate of deposit or a cashier's check. When you obtain your bond, it's a good idea to immediately copy the document, and then send the document original to the institution requiring you to purchase the bond.

Almost all lost instrument bonds cover one year, but the financial organization requiring the bond purchase may ask that you purchase a bond for a longer timeframe. That's why it's important to notify the financial organization if the original document is found. When applying for your bond, you will be required to specify the exact date when you lost the financial instrument, as well as the details surrounding the loss.

We know you have options, but we're always appreciative of the opportunity to earn your business and trust. Please think of us for all your surety bond needs. We've been in the surety business since 1984 and we know how to you the right bond at the best rates available in all states. Feel free to call us anytime. We love answering questions and are always here to help.