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Lost Instrument Bond

lost instrument bond

According to the Federal Reserve Bank of St. Louis, the number of commercial banks in the US has been falling steadily for decades. In the mid 1980s, the total was over 14,000 but now it's below 5,000. Despite that decline, people are still dependent on banks (and other financial institutions) to issue financial instruments like cashier's checks. Part of the reason banks are willing to issue these instruments is because of lost instrument bonds.

What Is a Lost Instrument Surety Bond?

A Lost Instrument Bond is a type of financial guarantee surety bond. Financial guarantee bonds were created to guarantee payments on a financial obligation. For instance, if your cashier's check is stolen or lost, a duplicate check will be issued. Should the stolen or lost check be deposited, the issuer will be responsible for the funds. A Lost Instrument Bond helps guarantee that if the original lost or stolen cashier's check shows up, the bonded party will be less inclined to cash it, too.

Lost Instrument Bonds involve three parties:

  • The principal is the one who is missing a financial instrument, and they are the party required to purchase the surety bond. You are most likely the principal. In that role, you are also financially responsible for any valid claims made against the bond.
  • The obligee is the financial institution that issued the instrument.They are trying to protect themselves from liability, which is why they require the principal to obtain a bond before issuing duplicate instruments. The obligee is allowed to file claims against the bond and is guaranteed to recoup their costs if they end up paying for an instrument twice.
  • The surety who produces the bond is the underwriting company. When claims are filed against the lost instrument surety bond, the surety investigates their merit and pays for any valid claims. The surety then collects that same amount from the principal (the bonded party).

Anyone who owns stock certificates, life insurance policies, mortgages, or other securities can benefit from a Lost Instrument Bond.

When Do I Need a Lost Instrument Bond?

If a financial instrument of yours (i.e. a cashier's check) becomes lost, stolen, or destroyed, then you will need a Lost Instrument Bond in order for the instrument's issuing authority to replace it. Financial institutions typically require a Lost Instrument Bond before furnishing you with a duplicate of the financial document. You will know when a lost instrument surety bond is required because the financial institution will inform you so. Until you can provide proof that you have an active bond, they will decline to issue you a duplicate instrument. Without the duplicate, the entire value of the instrument is gone.

You may require a Lost Instrument Bond to claim ownership of assets if you are missing the documents that prove ownership, such as:

  • Stock certificates
  • Property deeds, notes
  • Car titles
  • Cashier's checks

Typically, Lost Instrument Bonds have a one-year term, and the obligee can request a longer term. The surety cannot cancel or release the bond, because the lost instrument may turn up at any time, keeping the liability open. If you do need a longer term, be sure to designate this on the lost instrument bond form you submit to the surety company.

Why Do I Need a Lost Instrument Bond?

You need a Lost Instrument Bond to protect the financial institution that issues the instrument, as it ensures that the instrument cannot be cashed multiple times. In the event that an instrument is lost or stolen, and the institution has to issue a duplicate, they will require a bond to ensure that they will not have to pay the amount of the instrument more than once, even if the original turns up.

What Is a Lost Instrument Bond Good For?

Even though the financial institution (the obligee) is the financial beneficiary of a bond agreement, the principal also benefits. Banks are more willing to issue duplicate certificates if their financial liability is smaller. Put yourself in their shoes — would you be willing to replace something of value without some guarantee that the original was gone? Bonds take the risk off the institution's shoulders and put it on the principal, which creates an incentive for them to act ethically as well. Principals have to accept a lost instrument bond cost as part of the agreement, but that cost is always smaller than the value of a lost instrument. To put it differently, it's a small price to replace something worth a lot more. It's easy to see why lost instrument bonds are good for everyone involved.

Benefits for the Obligees:

A Lost Instrument Bond protects the bank in case someone fraudulently redeems a lost instrument. In that case, if the true owner claims ownership of an asset, the institution can claim on the bond to recoup their losses from the surety. Then, the party who is not the true owner would then have to reimburse the surety for the amount paid on the claim.

Benefits for the Principal:

If banks were unwilling to issue duplicate instruments, there would be huge consequences for losing a cashier's check or a stock certificate. Considering that these high-value instruments exist as fragile pieces of paper, the risk of them being lost or destroyed is high. Having the ability to get duplicate instruments is an important protection against the unexpected, but without financial reimbursement guaranteed by the bond agreement, most banks wouldn't offer this protection.

How Much Are Lost Instrument Bonds Written for?

There is no minimum or maximum amount for a Lost Instrument Surety Bond, and the amount is based on the value of the asset. To give you an example, if you're trying to replace a $10,000 cashier's check, then you designate on the lost instrument bond form that you need a bond for $10,000. If a claim was ever filed against the bond (because someone cashed the original check), then the surety company would pay out exactly $10,000. Afterwards, they would collect the same amount from you, the principal in the bond agreement.

How Much Do Lost Instrument Bonds Cost?

Lost Instrument Bonds have a minimum charge of $100, which covers any instrument up to a $5,000 value. Above that, each thousand-dollar increase of instrument's value typically results in a $20 premium increase, sometimes less. Lost Instrument Bonds for more than $10,000 require underwriting, and occasionally financial information from the principal. Underwriting is a process of risk assessment. Professionals examine an applicant's lost instrument bond form and investigate his or her financial history to determine how likely they are to pay back the surety company for any claims it compensates. That's why larger bonds require a more extensive underwriting process. At Viking Bond Service, we make every effort to approve applicants regardless of their financial history. Bad credit may translate to a slightly higher lost instrument bond cost. Fortunately, it doesn't have to mean being denied a bond and being unable to get a duplicate instrument as a result.

What Do You Need to Secure a Lost Instrument Bond?

In order to obtain a Lost Instrument Bond, you must submit a statement explaining:

  • The loss of your instrument
  • The related circumstances
  • The date the instrument was lost.

Your instrument must have been lost for a minimum of 30 days before you can receive the bond.

Get Your Lost Instrument Bond Fast

Viking writes Lost Instrument Bonds nationwide. We provide quotes for Lost Instrument Surety Bonds quickly, usually within 24 hours from the receipt of the application and required documents.

The sooner you get the bond you need, the quicker your bank will issue a duplicate instrument. So why wait? Viking Bond Service has all the resources you need, and they're available right now. Dive into our online application to get the process started, or fill out the contact form on this page if you have questions. We also have bond professionals standing by to take your call at 1-888-278-7389. We work with individuals from all across the country and offer bonds recognized by all reputable financial institutions, so don't hesitate to make Viking Bond Service your surety of choice.

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