Lost Instrument Bonds

What is a lost instrument surety bond?

We are often in possession of financial documents that represent money in hand, like cashier’s checks, bonds, or promissory notes. If these valuable papers get misplaced or stolen, we can go to the financial institution that issued them and ask them to replace it. But what happens if the original is presented at the financial institution and they honor it? In effect, they would be paying out twice. That's where a lost instrument bond comes in.

With this type of bond, you can obtain a replacement check, and the financial institution will not be liable for honoring the original if someone tries to cash it. A lost instrument bond is also known by other names, such as:

• Lost cashier's check bond
• Lost deed bond
• Lost note bond
• Lost security bond
• Lost stock certificate bond

How much does a lost instrument bond cost?

Typically, a lost instrument bond costs 2% of the value of the misplaced financial document. Some surety companies charge a flat fee, like $100, if the value is under a certain amount. This all depends on the surety company.

What is the value of the lost instrument bond?

Bond amount is determined by the financial institution that issued the financial instrument and is typically 1.5 times the value of the lost instrument.

Who buys the lost instrument bond?

The person that owns the lost financial document is known as the principal. The principal is responsible for purchasing the lost instrument bond. It's a good idea to make a copy of the bond before giving the original to the issuing financial institution. Lost instrument bonds are available to purchase in all 50 states and territories.

What type of instruments apply?

You can obtain a lost instrument bond for these documents:

• Car titles
• Cashier’s checks
• Corporate or municipal bonds
• Life insurance policies
• Loan shares
• Promissory notes
• Property deeds
• Real estate certificates
• Savings bank books
• Stock certificates

How does a lost instrument surety bond work?

First, you need to report immediately to the issuer that you have misplaced the document. The issuer (typically a banking institution) will require that you purchase a surety bond before issuing a new document. Sometimes, they will have you wait for 30 days before you get a lost instrument bond just in case the original shows up. Then, you contact a surety bond company that will issue and underwrite the bond. The surety company guarantees to reimburse the financial institution in case the lost instrument is presented twice. If you find the original, it should be sent to the surety company as soon as it is found.

Are there different types of lost instrument bonds?

Yes, there are two types: Open penalty and fixed penalty bonds. Open penalty bonds pertain to those financial documents that can gain or lose value, such as stock certificates. These types of bonds will fluctuate according to the value of the financial instrument. Fixed penalty bonds refer to those instruments with a fixed price, like a cashier's check.

How long do lost instrument bonds last?

Depending on the issuing surety company, a lost instrument bond can last from one year to multiple years. Also, the financial institution may ask for a multi-year bond.

Can a lost instrument bond be canceled or released?

The bond cannot be canceled before the end of the determined term because the lost document could show up at any time. In cases of very expensive documents, the financial institution may ask you to renew the lost instrument bond.