Warehouse Bond

State governing authorities often require warehouse facilities to obtain warehouse bonds. The bonds hold warehouse operators accountable and ensure they operate their businesses legally and ethically. Warehouse bonds protect consumers if their goods are damaged or stolen while being stored. They also act as safeguards against costly lawsuits for facility operators.

Check with your state governing agency to learn if this bonding requirement applies to you. The types of goods you store may play a role in determining if you need this bond. You can also call ZipBonds at (888) 435-4191 for help with any part of the bonding process. 

The following states may require this bond:

• New York
• Wisconsin
• Georgia
• South Dakota
• Massachusetts
• Alabama

Like other license and permit bonds, warehouse bonds are three-party contracts involving a surety, an obligee, and a principal.

• Principal: The bonded warehouse operator
• Obligee: The state governing authority that requires the bond and provides a business license to the warehouse operator
• Surety: The bond underwriter that guarantees financial compensation in the case of claims

Bond Claims

If a bonded storage facility fails to comply with the terms of its bond agreement, any party that experiences damages can file a claim on the bond. For example, the warehouse may be responsible for covering claims arising from property theft. If an individual’s goods are stolen, the individual can file a claim to be reimbursed for their losses.

Renewing Your Warehouse Bond

Warehouse bonds are typically good for one-year terms and then must be renewed. Many states require these bonds as part of the state licensing process for warehouse operators. The bond ensures the storage facility complies with state laws and regulations regarding storing and handling goods for customers.

Warehouse bond costs can vary by state. When setting the bond amount, your state authority may consider the size of your operation and the value of goods your facilities store. You will pay a small percentage of your bond requirement (penal sum). 

Some states may weigh your credit score and business financials when setting your annual premium rate. In some states, the bond penal sum could range from $5,000 to $10,000. Other states set bond amounts on a case-by-case basis, factoring in the collective value of stored goods in each warehouse location. 

Expect to pay around 1-5% of the penal sum if you have good credit. If you have poor credit, you could pay more – possibly up to 10%. For example, if you live in a state that requires a $10,000 bond for each warehouse location and your rate is 1%, you’d pay $100 annually per warehouse.