Auto Title Surety Bonds

Surety Bonds

• A surety bond, in general, is a guarantee of performance of a specific obligation or contract. An auto title surety bond, also known as a defective title bond, provides a guarantee of ownership to a state's Department of Motor Vehicles. A title bond is required to satisfy the ownership documentation for a vehicle that does not have other forms of documentation available. 

• Purpose

  • A title bond is used to re-establish a person's ownership of a car before selling it and transferring the title legally to someone else. If the original title documents are unavailable, a title bond must be purchased in order to satisfy the DMV. Certain situations may cause a title to be unclear. For example, an individual has paid for a car, but the lien holder has gone out of business and the car's title is unobtainable; the car's original documents have been lost or destroyed in a disaster, or no title exists because the car was custom made or is very old.

    The bond serves as insurance to protect a rightful owner or lien holder to a car by proving ownership, in case the title is released to someone who does not legally own the car.

  Bond Value and Premiums

• The title bond amount should be set based on the estimated replacement or recovery cost of the car. This cost is determined by performing an appraisal of the vehicle to assess its condition and market value. Premiums for a title bond vary depending upon the bond issuer. As an example, a title bond may cost 1.5 percent of the bond amount, with a minimum $150 premium.