To get an indemnity bond, identify the type of bond your situation requires, apply to a surety company that will review your credit and finances, sign the indemnity agreement, and pay the premium. For most applicants with decent credit, the whole process takes a few days to a couple of weeks, and the premium runs about 1% to 3% of the bond’s face value. The bond itself protects a third party you owe an obligation to; the agreement you sign makes you personally responsible for paying the surety back if a claim is ever paid out.
Step One: Identify the Bond You Need
An indemnity bond is a three-party arrangement. You are the principal. The surety company issues the bond. The obligee is the third party the bond protects. If you don’t meet your obligation to the obligee, they can file a claim, and the surety pays. The specific bond you need depends entirely on what obligation you’re guaranteeing, and that in turn drives which surety will write it and what documentation they’ll want.
Common situations include replacing a lost stock certificate or cashier’s check, serving as executor or administrator of an estate, bidding on or performing a public construction contract, holding a contractor’s license, and closing a real estate transaction with an unresolved title defect. Each has its own paperwork trail. A lost stock certificate bond protects the issuer and its transfer agent against the original surfacing later; the premium runs two to three percent of the certificates’ current market value, and these bonds are often “open penalty,” adjusting with the stock’s value and typically requiring only a single premium payment rather than annual renewals.1Investor.gov. Lost or Stolen Stock Certificates2Legal Information Institute. UCC 3-312 Lost, Destroyed, or Stolen Cashier’s Check, Teller’s Check, or Certified Check3HelpWithMyBank.gov. Why Do I Need an Indemnity Bond to Replace a Lost Cashier’s Check A probate bond protects heirs and creditors from mismanagement by the executor. On federal construction projects worth more than $100,000, contractors must post both a performance bond and a payment bond before the contract is awarded.4Office of the Law Revision Counsel. 40 USC 3131 – Bonds of Contractors of Public Buildings or Works
One boundary worth knowing: a probate bond isn’t always required. If the will says the executor serves without bond, courts frequently honor that, especially with beneficiary agreement. Even without that language, an executor can petition for a waiver with written consent from every beneficiary and clear financial statements of the estate.
Step Two: Find a Surety Company
Not every insurance company writes indemnity bonds. You need a surety company or an insurer with a surety division. For federal bonds, the U.S. Treasury publishes Department Circular 570 through the Bureau of the Fiscal Service listing companies certified to write them.5Bureau of the Fiscal Service. Surety Bonds Even if your bond isn’t federal, that list is a useful starting point because every company on it has met the Treasury’s financial standards.
For routine bonds like lost instrument bonds, independent surety bond agencies and online bond providers handle most of the market. Shop more than one. Premium rates vary, sometimes significantly, between companies writing the same bond for the same applicant.
If You’re a Small Contractor
Small contractors who can’t qualify on their own have a federal option. The SBA’s Surety Bond Guarantee Program backs bid, performance, and payment bonds for small businesses, covering contracts up to $9 million for non-federal work and up to $14 million for federal contracts. The SBA charges a fee of 0.6% of the contract price for performance and payment bond guarantees, with no fee for bid bonds.6U.S. Small Business Administration. Surety Bonds You apply through an SBA-authorized surety agent rather than the SBA directly.
Step Three: Submit the Application
Every surety requires baseline documentation, with specifics varying by bond type. Plan on providing:
- Personal identification such as a driver’s license, state ID, or passport.
- Financial information. Your credit history is the single biggest factor in your premium. The surety will also want documentation of assets and, for larger bonds, financial statements.
- Bond-specific details. For a lost stock certificate, the certificate number, issue date, and current market value. For a lost cashier’s check, the exact amount. For construction bonds, the contract itself, project specifications, and your company’s financial statements. For probate bonds, the court order appointing you and details about the estate’s value.
The application form identifies you as the principal, names the obligee, describes the covered obligation, and sets the bond’s dollar amount. Fill it out completely the first time. Incomplete applications are the most common cause of delay.
Step Four: Underwriting and Issuance
Once you submit, the surety underwrites the application. It’s a risk assessment: the company reviews your credit, financial standing, and the specifics of the obligation to decide whether to issue the bond and at what rate.
Straightforward bonds like lost instrument bonds can clear underwriting in a few business days. Larger construction or commercial bonds involve a deeper review of financial history, your track record on similar obligations, and sometimes your business’s organizational structure. The surety may ask for more documentation along the way.
If approved, the surety issues the bond and coverage begins once you pay the premium. Before issuance, you’ll also sign the indemnity agreement.
What the Bond Costs
The premium is a percentage of the bond’s face value. For applicants with good credit, premiums on most indemnity bonds fall between 1% and 3% of the bond amount. Weaker credit can push that to 4% or higher. On a $25,000 bond, a well-qualified applicant pays somewhere between $250 and $750.
Lost stock certificate bonds tend to land at the lower end and are typically paid once. Construction bonds, probate bonds, and other obligation-specific bonds often require annual premium payments for as long as the obligation exists. The bond stays active until the covered risk disappears: the project is finished, the estate is closed, or the lost instrument’s statute of limitations expires.
The Indemnity Agreement You Sign
This is the part most applicants gloss over, and it is the part that matters most if something goes wrong. The General Agreement of Indemnity obligates you to reimburse the surety for every dollar it pays on a claim, plus legal fees, investigation costs, and related expenses. The obligation applies regardless of whether you believe the claim was valid.
If a business is the principal, every person who owns 10% or more of the company typically must sign the agreement individually. Personal assets go on the hook, not just business assets. If the business can’t repay a claim, the surety can pursue the individual owners for the full amount.
Treat the surety as a lender, not an insurer. An insurance company absorbs your losses in exchange for premiums. A surety company fronts money to the obligee and collects it back from you. The premium is a fee for the surety’s willingness to guarantee your performance, not a payment that covers future claims.
What Happens If a Claim Is Filed
If the obligee believes you’ve failed to meet your obligation, they file a claim against the bond. The surety investigates by contacting you, reviewing documentation, and evaluating the claim’s validity. You’ll be asked for your side of the story and any supporting records.
If the surety concludes the claim is valid, it pays the obligee up to the bond’s face value. Then the indemnity agreement activates: the surety turns to you for full reimbursement of what it paid, plus its costs for investigating and resolving the claim. That obligation isn’t negotiable. It’s the contract you signed when the bond was issued.
If Your Application Is Denied
Poor credit is the most common reason for a denial, and one rejection doesn’t close every door. Surety companies that specialize in high-risk applicants will often issue bonds at higher premium rates where standard-market sureties won’t. Posting collateral is another route. A surety may approve an otherwise unqualified applicant who deposits cash, pledges real estate free of liens, or provides an irrevocable letter of credit for a portion or all of the bond amount.
Adding a financially strong co-signer or indemnitor can also change the outcome. The co-signer shares your obligation under the indemnity agreement, giving the surety more confidence it can recover on a claim. For small contractors, the SBA Surety Bond Guarantee Program exists specifically to bridge the gap when a business doesn’t yet have the financial track record to qualify on its own.6U.S. Small Business Administration. Surety Bonds
If you’ve been denied, ask the surety exactly why. Credit issues can sometimes be addressed by correcting errors on your credit report or paying down outstanding debts before reapplying. Missing financial documentation is simpler to fix: provide what was left out and resubmit.