Do Certificate of Title Bonds Reestablish Vehicle Ownership?

When the title or original proof of ownership to a motor vehicle is lost, damaged, or defective, it becomes necessary to reinstate ownership through a replacement title before the vehicle can be legally registered, sold, or transferred. As a crucial part of the replacement title application process, the state's Department of Motor Vehicles (DMV) or a county tag and title office often require a certificate of title bond, also known as a lost title bond or title surety bond.

What Does a Certificate of Title Bond Guarantee?

The specific coverage of a certificate of title bond is determined by the explicit language of the bond and the regulations of the applicable state. These bonds generally ensure the right to a clean title and provide protection to the DMV and individuals who might suffer losses due to title defects, undisclosed liens, or claims on the title. Depending on the laws of the state in question, both former owners and subsequent purchasers could be safeguarded.

What is the Bond Amount?

The penal sum or bond amount, which signifies the coverage it offers, is established by each state. Typically, this sum is based on the vehicle's condition and appraised value. The bond amount is often set at the fair market value or a multiple of the book value. Some states, however, may enforce minimum bond amounts or fixed amounts based on the vehicle's type and age. For instance, some states require a bond equal to twice the average retail value, with a bond minimum in the thousands. Other states mandate a $10,000 bond for passenger cars over ten years old, regardless of their condition or appraised value. The amount of premium due is a percentage of the bond amount.

Contact your insurance agent for more information on requirements in your state. Use our Find an Agent tool to locate an experienced insurance agent near you.

Underwriting Certificate of Title Bonds

Our underwriting process considers two key factors: the size of the bond and the specifics of the state's bond obligation. Each state may demand a specific bond form, and the language of the coverage in the form, along with relevant statutes and regulations, significantly influences our underwriting decision. Leveraging our positive experience, we can instantly issue some Certificate of Title bonds. Merchants does not require indemnity signatures for bonds up to $75,000.

Requirements for Larger Bonds

For larger Certificate of Title bonds, the following documents are required:

  • Completed bond application.
  • Proof of ownership, including a copy of the Bill of Sale, Customs Papers (if the vehicle was imported), and state's DMV papers.
  • Satisfactory credit assessment based on the applicant's credit report. In some cases, a financial statement might also be necessary.

Indemnity and Renewability

Indemnity is essential for many bonds, and larger requests may necessitate spousal indemnity. It's important to note that these bonds are not renewable. They are valid for a designated period, and a one-time term premium is collected upon issuance. Rates and terms may vary by state.

Understanding Bond Rates

Bond rates are subject to change and are specific to each state. To verify current bond rates and gather information, appointed insurance agents can visit our intuitive and efficient bonding website the Hub. By searching for "certificate of title," you can easily preview bond forms and receive instant price quotes. For any inquiries, feel free to contact your commercial underwriter.

Navigating Claim Procedures

All certificate of title bonds operate on a basic premise: If the bondholder violates the bond's terms, a claim can be filed for compensation. If valid, the surety will pay the claim, but the bondholder must reimburse the surety in full.

How Do I get a Surety Bond?

Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.

What is a Surety Bond?

A surety bond is a three-party agreement that ensures the fulfillment of a commitment or contract. For instance, the surety (Merchants Bonding Company (Mutual)) may provide a surety bond to a construction company (the principal) which is required by the state (the obligee), ensuring the construction company will perform the duties as outlined in the contract. In bonding the construction company, Merchants assumes the risk should the company default or not fulfill their contract. A surety bond is different from traditional insurance in that the principal is obligated to pay back the surety company on any claims paid out.

All information provided is subject to change without notice.