Utility Bond

Utility Bond

As a general practice, most utility companies will require a security deposit before they agree to provide utility services. Depending the on the anticipated usage for the service location, the security deposit can range from a few hundred dollars to tens of thousands of dollars or even higher. If the utility company allows for it, the surety bond can be a cost-effective way for businesses to keep more money in their hands without tying up their funds with large cash deposits.

A utility deposit surety bond is a type of financial guarantee bond that guarantees payment to the named Utility company if the principal (business and/or business owner(s)) fails to pay for utility services provided within the agreed upon terms between parties. In the event of default, the surety would investigate the demand for payment and, if valid, issue payment to the Utility company per the terms of the bond form. However, there is a catch. If the surety does issue a claim payout, they will look to the Principal to recover any losses and require full repayment for any claims paid.

Generally, the rates for this type of bond will start at 2% for preferred applicants with strong personal credit and financial statements (if required) but are often rated between 3-5% of the required bond limit. Non-standard and collateralized rates are also available. For example, a $10,000.00 bond requirement could result in a $200.00 annual premium for preferred applicants but can range based on credit up to a $2,500.00 annual premium with possible collateral required.

Ready to apply? For requests under $25,000.00, we can often provide an approval based on just a completed bond application and review of the personal credit of the applicant(s). We may also need to review the Utility company’s specific bond form if requested. However, for the best terms, and for any bonds over $25,000.00, typically business and personal financial statements are required.  Due to the financial nature of this bond obligation, it is considered a hazardous bond type and therefore usually requires a bit more underwriting review than any other standard license or permit bond.

In addition to the payment guarantee aspect of this bond requirement, there can also be language included in the Utility Company’s bond form that may not be agreeable to a surety company. If you find yourself having a hard time getting one of these bonds placed, give us a call at 1-888-518-8011 or apply online today!



If you or your business needs help in obtaining a surety bond or commercial insurance give us a call!