Lost Instrument Bond

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What is a lost instrument bond?

A lost instrument bond is a commercial surety bond that protects financial institutions when they must issue a duplicate of a financial certificate (“instrument”) when the original has gone missing (was either lost or stolen). 

Since financial institutions are financially responsible for the securities they issue, they often require bonds before issuing duplicates. For example, the bond can guarantee that someone doesn’t cash a check twice if they report the first one missing. 

This bond may go by other names, including lost securities bond, lost note bond, or indemnity bond for lost instruments.

What is a financial instrument?

Financial instruments are monetary contracts between parties. Examples include checks, money orders, cash, stocks, funds, loans, corporate bonds, car titles, property deeds, and more.

Get Your Lost Instrument Bond:

Quick Takeaways

  • A lost instrument bond protects financial institutions when they must issue a duplicate of a financial certificate when the original has gone missing. 
  • There are two different types of lost instrument bonds: fixed penalty and open penalty.
  • Your financial institution will set your bond limit, typically 1.5 times the value of the lost certificate. 
  • If your financial asset is lost or stolen, you may need a lost instrument bond to replace it. Without it, your financial institution may not issue you a duplicate document.

Types of Lost Instrument Bonds

There are two different types of lost instrument bonds: fixed penalty and open penalty.

  • Fixed penalty bonds: A fixed penalty bond is required if the lost financial assets have a fixed value. The bond’s value is set to the price of the assets when the bond is issued.
  • Open penalty bonds: If the lost financial items have fluctuating market values (such as stocks or bonds), an open penalty bond is required. In this case, the bond’s value is open and fluctuates (making it riskier for the surety).

How do lost instrument bonds work?

Lost instrument surety bonds are three-party agreements between a principal, an obligee, and a surety.

  • Principal: The party whose financial instrument is lost, stolen, or destroyed
  • Obligee: The financial institution that issued the financial asset and requests protection from liability via a surety bond
  • Surety: The company that underwrites the surety bond and pays out valid claims (and then seeks reimbursement from the principal)

Who benefits from this bond?

The Obligee

The financial institution (obligee) is the primary beneficiary of a lost instrument bond. The bond protects banks financially in case someone intercepts an asset and redeems it illegally. If the rightful owner comes forward, the bank can file a claim on the bond to recover their losses. The person who stole the asset would then be responsible for repaying the surety. 

The Principal

The principal is the party that lost the original certificate and must get bonded before the financial institution will issue them another one. The bond benefits the principal by offering them a way to reclaim the item they lost. Without it, the principal could lose the entire value of their asset.

Frequently Asked Questions

The cost of your surety bond will be based on the bond amount you need. Your financial institution will set your bond limit, which is typically 1.5 times the value of the lost certificate

ZipBonds can issue lost instrument bonds for as low as 1-5% of the bond amount, or $100. For example, if you need a $10,000 bond and your rate is 1%, you’d only pay $100.

Lost instrument bonds typically last for one year and don’t require renewal. These short-term bonds remain in effect for 12 months unless your financial institution requests a multi-year bond. You won’t be allowed to cancel or release your bond before it expires. This protects the obligee for a fixed term in case the lost asset shows up.

If your financial asset is lost or stolen, you may need a lost instrument bond to replace it. Without it, your financial institution may not issue you a duplicate of the document. 

Apply for Your Lost Instrument Bond Today

When you apply for your lost instrument bond, we may ask for information regarding your lost instrument and the circumstances surrounding the incident. You can start your application online or call us at (888) 435-4191. One of our agents would happily walk you through the process over the phone and answer any of your questions.

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About ZipBonds.com

Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”

Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.