What Is a Bonded Title? How Title Bonds Restore Ownership

When the title or original proof of ownership for a motor vehicle is lost, damaged, or defective, the owner may need to obtain a bonded title before the vehicle can be legally registered, sold, or transferred. Merchants Bonding Company™ issues certificate of title bonds that allow vehicle owners to resolve ownership documentation issues and apply for a bonded title.

A certificate of title bond, sometimes called a lost title bond, defective title bond, or lost car title bond, is a type of surety bond required by many state Departments of Motor Vehicles (DMVs) or Bureaus of Motor Vehicles (BMVs). The bond protects the state and other parties if a dispute later arises regarding ownership of the vehicle.

Bonded titles are commonly required when documentation problems occur, such as an unsigned title, incomplete ownership records, or a title indicating true mileage unknown.

Why You Might Need a Bonded Title

Vehicle owners often discover they need a bonded title when problems arise during the title transfer process. If the DMV cannot verify ownership through normal documentation, the state may require a certificate of title bond before issuing a replacement title.

Common situations that may require a bonded title include:

• Purchasing a vehicle but discovering the seller didn't sign the title

• Buying a vehicle that never came with a title

• Losing the original title before transferring ownership

• Discovering title records that list true mileage unknown

• Encountering errors in the ownership chain or missing paperwork

• Responding to DMV investigations involving ownership verification or a DMV attorney information request

In these situations, the certificate of title bond allows the DMV to issue a bonded title while protecting previous owners and future buyers from potential ownership disputes.

What Is a Bonded Title?

A bonded title is a vehicle title issued by a state's DMV when ownership cannot be verified through standard documentation. The title is supported by a certificate of title bond that protects the state and other parties if a legitimate ownership claim is later made.

The bond provides financial protection during the state's required bonding period. If no claims are filed during that period, the vehicle owner may later apply for a standard title without the bond requirement. 

What Does a Certificate of Title Bond Guarantee?

The specific coverage of a certificate of title bond is determined by the bond language and the laws 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 competing ownership claims.

In some situations, the DMV may investigate ownership documentation. This investigation may include issuing a DMV attorney information request to obtain additional information about the vehicle's ownership history.

Depending on state law, both previous owners and future purchasers may be protected by the bond.

What Is the Bond Amount?

The bond amount, sometimes called the penal sum, is the maximum amount the surety may pay if a valid claim is filed against the bond. Each state determines the bond amount required for a certificate of title bond.

In many states, the bond amount is based on the vehicle's fair market value. Some states require a bond equal to twice the vehicle's appraised value.

For example, applicants obtaining a surety bond in Michigan for a bonded title may be required to provide a bond equal to twice the vehicle's value. Other states may establish fixed minimum bond amounts depending on the vehicle's type or age.

The premium, or cost of the bond, is typically a small percentage of the total bond amount.

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

What's Needed to Obtain a Certificate of Title Bond?

Our underwriting process considers two key factors: the size of the bond and the requirements of the state's bond obligation. Each state may require a specific bond form, and the language within the form, along with relevant statutes and regulations, influences underwriting decisions.

Leveraging extensive underwriting experience, Merchants can instantly issue some certificate of title bonds, with many being available for applicants to order themselves using the Hub Express. Contact your local insurance agent for more information or use our Find an Agent tool.

Surety bonds are issued by Merchants through licensed insurance agents. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company) to underwrite your bond.

Requirements for Larger Bonds

For larger certificate of title bonds, the following documentation may be required to get a bond:

• Completed bond application

• Proof of ownership, such as a bill of sale, customs documents for imported vehicles, or DMV paperwork

• Credit assessment based on the applicant's credit report

• Financial statements when required

Merchants does not require indemnity signatures for bonds up to $75,000, but indemnity is required for larger bonds. 

Navigating Claim Procedures

Certificate of title bonds operate on a simple premise. If the bondholder violates the bond terms or another party proves legal ownership of the vehicle, a claim may be filed against the bond.

If the claim is validated, the surety may compensate the injured party up to the bond amount. The bondholder must reimburse the surety for any claims paid.

Understanding Bond Rates

Bond rates vary by state and are subject to change. The bond rate determines the premium, or cost, that the applicant pays for the bond.

Insurance agents can verify current rates and review bond forms by signing in to Merchants Bonding Company Hub™ and searching for certificate of title bonds.

The Hub allows agents to preview bond forms and receive instant price quotes. Agents with questions about rates or underwriting requirements can contact their commercial underwriter.

Frequently Asked Questions

When is a bonded title required?

A bonded title may be required when vehicle ownership cannot be verified through standard documentation. This may occur when titles are lost, paperwork is incomplete, or errors appear in ownership records.

How much does a certificate of title bond cost?

The cost of a certificate of title bond depends on the bond amount required by the state. The premium paid for the bond is typically a small percentage of the total bond amount.

How long does a bonded title last?

Certificate of title bonds are not renewable. They remain valid for a designated period determined by the state, and a one-time premium is collected when the bond is issued. In most states, bonded titles remain in effect for three to five years. After that period, if no claims are filed, the vehicle owner may apply for a standard title without the bond requirement.

Are bonded title requirements different by state?

Yes. Bond requirements vary significantly by state. For example, individuals obtaining a surety bond in Michigan may need a bond equal to twice the vehicle's value, while other states establish different minimum bond requirements.

Can you sell a car with a bonded title?

Yes. In most states, a vehicle with a bonded title can be sold. The bonded title remains in effect until the state-required bonding period expires, and the bond continues to protect future owners during that time.

What documentation may be required for a bonded title application?

Applicants may need to provide documentation such as: Bill of sale Vehicle identification number verification Previous registration records DMV investigation notices, including a DMV attorney information request Documentation requirements vary by state.

What is a surety bond?

A surety bond is a three-party agreement that guarantees the fulfillment of a commitment or obligation. The surety provides the bond on behalf of the principal to protect the obligee. For example, Merchants may issue a certificate of title bond to a vehicle owner who must obtain a bonded title before the DMV will issue a replacement certificate of title. Unlike traditional insurance, the principal is responsible for reimbursing the surety if a claim is paid.

How do I get a surety bond?

Surety bonds are issued by Merchants through licensed insurance agents. Contact your local insurance agent or use our Find an Agent tool to determine the requirements for a certificate of title bond. Your insurance agent can guide you through the application process and explain what documentation may be required.

All information provided is subject to change without notice.