What is a lost instrument bond?
When a financial certificate such as a cashier’s check is lost or stolen, the institution that issued the check is held responsible. Therefore, if a duplicate check is issued and the lost or stolen check is deposited, the issuer must pay those funds.
The lost instrument bond is put in place to guarantee if the original lost instrument shows up in the future, the bonded party will not be able to cash it as well.
By requiring this bond, the financial institution ensures the bank does not lose money and afflict an economic loss by paying the amount of the check’s worth more than once. Other types of financial certificates protected under this bond include stock certificates, check or money orders, corporate bonds, promissory notes and more.
Lost instrument bonds can be written in all 50 states and are often required by financial institutions in order to issue a duplicate of a financial certificate that has been lost or stolen.
How much does a lost instrument bond cost?
The lost note bond amount is set by the financial institution that issued the certificate, but is typically 1.5 times the value of the lost or stolen certificate.
Depending on the type of certificate, the premium is calculated at $20 per thousand of the bond amount. Bonds up to $5,000 may be instantly issued for just $100! When a lost instrument bond amount exceeds $5,000, it is subject to underwriting where additional financial credentials may be required.
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Lost instrument bond types
- Open penalty surety bonds have fluctuating market values and could be issued for lost items, such as stock certificates or any other item with a fluctuating market value.
- Fixed penalty surety bonds are required when the lost items have a fixed value, such as certified checks or certificates of deposit.
More information about lost instrument bonds
Lost instrument bonds are generally issued for a one-year term, but the financial institution requiring the bond may ask for a multiple year term. The bond does not renew past the initial term and cannot be canceled or released by the surety because the lost instrument may turn up at another time in the future, keeping the liability open if it is used again.