Colorado Lost Instrument Bonds

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Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all your Colorado lost instrument bond needs.

What Are They?

Colorado lost instrument bonds acknowledge a basic reality of life—we human beings have an annoying tendency to lose things. Fortunately, it’s usually something like the house keys or a pair of eyeglasses that soon turn up, or if not, can be replaced without too much trouble or expense. But sometimes, it’s a financial instrument, like a stock or bond certificate, money order, cashier’s check, promissory note, or another item that can be converted into cash and is not as easily replaced as your glasses. Lost instrument bonds also apply in cases where a financial instrument has been stolen or destroyed.

The issuer of one of these instruments typically will require you to purchase a lost instrument bond before issuing a replacement. The bond protects the issuer in the event that the original instrument is cashed in or sold by someone after you’ve received a replacement (i.e. cashed in twice). It also serves as your guarantee to return the replacement instrument to the issuer if you find the lost one at any point.

Some financial instruments, such as money orders and cashier’s checks, have a fixed value. Others, such as stock certificates or variable rate whole life insurance policies, fluctuate in market value. Consequently, there are two types of lost instrument bonds: fixed penalty and open penalty.

Who Needs Them?

Anyone applying to the original issuer for a replacement financial instrument will need to purchase the appropriate type of lost instrument bond. The required bond amount is frequently 1.5 times (or some multiple) the value of the lost instrument.

Speak with a Surety Bond Professionals agent today to discuss your bonding needs.

How Do They Work?

There are three parties to the surety bond agreement for a Colorado lost instrument bond:

  • The issuer of the replacement instrument (oftentimes a transfer agent) is the “oblige.”
  • The person applying for the replacement instrument is the “principal.”
  • The bond company underwriting the lost instrument bond is the “surety.”

The surety bond agreement obligates the principal to return the replacement instrument in the event that the original is found after issuance of the replacement. If the principal fails to do so, causing the obligee to incur a financial loss, the obligee will file a claim against the principal’s lost instrument bond.

The usual practice is for the surety to pay a valid claim on behalf of the principal, essentially extending credit to the principal and creating a debt that the principal is legally obligated to repay. The obligee benefits from this process by receiving timely compensation for the loss caused by the principal’s failure to return the replacement instrument. The principal benefits from the ability to repay the surety in installments rather than having to come up with a large sum all at once.

What Do They Cost?

How much you will pay to purchase a Colorado lost instrument bond depends on the bond amount required by the obligee. It’s common for lost instrument bonds for $5,000 or less to be sold for a small flat fee of $100, while bonds for more than $5,000 go through underwriting.

The surety’s primary underwriting concern is the risk associated with extending credit to the principal, so the premium rate will be based largely on the principal’s credit score. For larger bonds, personal and/or business financials certainly become a factor. A principal with very good credit and financial stability will likely pay a premium that’s about 1-2% of the bond amount.

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Our surety bond professionals will get you the Colorado lost instrument bond you need at a competitive rate.