What is a utility bond?
A utility bond ensures an individual or a business pays their utilities on time. Utility companies can require customers to get bonded before turning on services if the customer plans to use a large volume of utilities. These bonds protect companies by guaranteeing they receive the money they’re owed.
Get Your Utility Bond:
- You may be asked to post a bond if you expect to use a large amount of a utility – like energy or water.
- These bonds protect utility companies by guaranteeing they receive the money they’re owed.
- If the policyholder fails to pay their bills in full or on time, the utility company may file a claim against the bond to recoup the money.
Who needs utility bonds?
You may be asked to post a bond if you expect to use a large amount of a utility – like energy or water. Manufacturing companies, for example, must use a lot of energy to run. So their utility companies may request a bond upfront to ensure full payment every month. Many businesses are required to obtain these bonds before receiving public services.
How do utility bonds work?
The bond is an agreement between three parties:
- Obligee: The utility company that requires the bond
- Principal: The person or business that must post the bond and abide by its terms
- Surety: A financial institution that underwrites, issues, and backs the bond
If the policyholder fails to pay their bills in full or on time, the utility company may file a claim against the bond. That way, they can recoup the loss.
The surety company will determine whether the claim is valid through investigation. If it is, the surety may compensate the utility company at first for their losses. However, the policyholder must repay the surety for the same amount over time – plus interest and fees.
Frequently Asked Questions
Your utility bond company will notify you of your bonding requirements. You must post your bond before your utility services are turned on or before the company performs other tasks for you.
The cost of your bond will depend on your unique circumstances. Expect to pay a small percentage of the amount your utility company requires as your annual bond premium. This could range anywhere from 1% (if you have good credit) to 10% or more (if your credit is poor).
You can still get bonded if you have bad credit, but your premium will be higher due to the greater risk of defaulting on a bond claim.
Apply for a Utility Bond in Your State
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply today online or call us at (888) 435-4191 to speak with an agent directly.
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.