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.