Surety Bond Option for Iowa Vehicle Service Contract Companies

vehicle service contract companies

Following the revision of regulations by the Iowa Insurance Division (IID), motor vehicle service contract companies in the state can substitute surety bonds for reimbursement insurance. The regulations were adopted in September and took effect on November 2, 2016.

Motor vehicle service contracts are also known as extended warranties—warranties that cover a vehicle after the factory warranty has expired. Factory warranties typically cover a new vehicle for a number of miles or years, after which the service contract provides extended coverage. Several motor vehicle service contract options are available when you purchase a new vehicle, and service contract companies offer those warranties.

In Iowa, motor vehicle service contract companies are required to register with the IID. Service companies must file a form (found here) and pay a $500 filing fee annually before August 1. They must also submit proof of financial security, in the form of reimbursement insurance, a reserve account or a surety bond. In the event that the company does not honor its contract, the financial security ensures customers can be reimbursed for the remainder of their service contract.

If a service contract company chooses to use a surety bond as their proof of financial security, the amount of required coverage is determined by the IID commissioner and is based on the value of service contracts sold that are not covered by any insurance. One year after the bond’s expiration, would-be claimants can no longer file claims against it. The bond can be canceled with 60 days’ written notice to the IID. If the surety chooses to cancel the bond, service contract companies must provide a substitute bond or reimbursement insurance policy within 30 days. The surety bond ensures that service contract companies comply with Iowa law and honor the contracts they issue.

Contact the IID with questions about registering a motor vehicle service contract company in Iowa. Call the experts at or fill out an online quote request to get your Iowa surety bond today!

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About the Author

Melanie Baravik
Melanie is a senior at the University of Missouri - Columbia studying English with an emphasis in creative writing. She is a member of the marketing department and outreach team for, a leading provider of online bonding for clients nationwide.