Utility Bond Information
What is a Utility Bond?
A utility bond is a form of insurance often required by utility companies, before the company will provide home or business owners with new utility services. Utility bonds guarantee the utility company that you must get all due utility bills payments to the utility company in time. Individuals must get utility bonds only in some specific circumstances. However, businesses are often required by the utility company to get the utility bond to the utility company before the utility company starts the new utility services. Homeowners might be asked to get utility bonds by the utility company if they have a track record of late utility services payments, in order to guarantee that they won’t default on their utility bills payment and to ensure they will get all payments to the utility company.
What Does a Utility Bond Deposit Do?
The utility deposit bond is a contractual agreement between three parties. Your business is the principal needing the utility bonds, the utility company is the obligee that requires the utility deposit bond, and the licensed surety company is the one providing the utility deposit bond. The utility deposit bond acts as a form of insurance for utility companies, as utility deposit bonds are a type of a financial guarantee bond.
Why Utility Surety Bonds are Important
In most cases, surety bonds often protect the consumer and surety bonds are required by state or government authorities. In this case, the protection is sought by the private utility companies by requiring utility deposit bonds. Financial guarantee bonds have been unpopular with sureties because of the higher financial risk involved. Recently, however, more surety companies are underwriting utility bonds, and the market is opening for utility bonds.
How Much Does a Utility Bond Cost?
Before home or business owners in many different states purchase new utility deposit bonds from a licensed surety bonds agency in order for them to get new utility services in their states, home and business owners must submit themselves to a new credit check, have their application approved, and get through other screening processes to get a quote for the utility bonds. Unlike other surety bonds, utility deposit bonds amounts are set on a per-case basis, meaning that the cost of utility deposit bonds and the amount of payment required can vary significantly depending on the state, individual’s credit, and utility company. However, it is a reasonable assumption that most applicants will have to make a payment between 1-10% of the total utility deposit bond amount.
What are Utility Bond Requirements?
Utility deposit bonds are required by specific utility companies prior to performing tasks, such as turning on new utility service for a business. While general liability insurance is required of these companies, commercial insurance usually isn't.
Listed below are the 3 absolutes in surety.
- Must be a US Citizen
- Cannot be in current bankruptcy
- Cannot be behind in child support
Don’t forget that getting an insurance claim on your utility surety bonds is not a good idea. If an insurance claim is proven, the surety will cover all costs up to the penal sum. Afterwards, you will have to reimburse the surety in full. An insurance claim against your utility bond can have a negative impact on your business, which is why you should always avoid insurance claims.