Lost Security Bonds by State
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Who Is Required to Purchase a Lost Instrument Bond?
If you have lost a financial document that represents a financial asset with real value and you want to replace the document or recoup the underlying asset, you will likely have to purchase a lost instrument bond.
Here are detailed examples of the two most common scenarios.
Have You Lost a Cashier's Check?
A cashier's check is considered a cash instrument tied to the bank, not your account at the bank.
When you lose a cashier's check and need to have a new check issued within a specific timeframe, the bank requires you to purchase a surety bond in the event the cashier's check is found and cashed at a later date by an unauthorized person.
Most banks have a standard timeframe, or waiting period, after which time they will issue you a new cashier's check. This waiting period is often 90 days.
A lost instrument bond is not required in this case. However, if you need the check within this timeframe, you will have to purchase the bond to have a new check issued.
Have You Lost a Security Certificate (Stock Certificate)?
Losing a stock certificate is less common today since physical certificates aren't issued, however this can be a common issue with asset transfers due to a will.
Nearly all publicly traded companies use transfer agents to manage the record of investors and their balances among other information. The most common transfer agent is ComputerShare.
When you lose a stock certificate the transfer agent is responsible for issuing new stock.
The transfer agent will send you the letter, on behalf of the issuing company, stating the requirement of the lost certificate surety bond.
Unlike lost cashier's checks, there is no waiting period for a lost stock certificate that prevents you from purchasing a lost securities bond.
What Is The Bond Amount?
The bond amount is the maximum limit of protection, or coverage, available to the issuing bank in the case of a lost cashiers check or a transfer agent/company in the case of a lost security or securities.
Lost Cashier's Check
In the case of a lost cashier's check, the amount will always be equal to the amount of the check.
If you choose to have a cashier's check replace, purchasing a lost instrument bond to recoup the money is required. For small check amounts, typically below $300, the cost of purchasing the surety bond may not make sense.
In most cases the minimum cost of a lost cashier's check bond is $100 to $150. So you will have to weigh the price against the reason for the cashier's check.
Again the bond amount is equal to the amount of the check.
Lost Stock Certificates
In the case of a lost stock certificate, the amount will be fixed and communicated to you in a letter from the transfer agent (or the company) who issued the stock.
This amount is based on the fair market value of the asset at the time of the letter being written.
In most cases, you have 30 days to purchase the lost certificate surety bond for the stated amount before that amount will be invalid and have to be recalculated.
How Much Does a Lost Instrument or Lost Security Bond Cost?
The cost of a lost instrument or security bond is determined by a rate quoted from a surety.
Similar to purchasing traditional insurance, the surety (an insurance company that underwrites surety bonds) will conduct an independent assessment based on:
- Personal credit
- The amount or value of the lost asset
Based on this assessment, the surety quotes a rate.
This rate multiplied by the bond amount is your price.
Why Use a Surety Agent Like Surety Bonds Direct?
Because every surety conducts an independent assessment to determine a rate, these rates will vary.
Finding the lowest rate can save you hundreds or even thousands of dollars when purchasing your bond.
In the case of a lost security bond, transfer agents like ComputerShare have agreements with one surety. That surety charges a set flat percentage of the bond amount, regardless of the specific situation. In the case of ComputerShare, they will charge you 5% of the bond amount.
However, you have other options for ComputerShare bonds with equally credible A-rated surety companies.
A surety company like Surety Bonds Direct, works with multiple A-rated sureties to find you the lowest rate in the market.
We have repeatedly secured rates from 1.5% to 2% for our customers.
The table below will show you how much money a lower rate is capable of saving you. And this is why using Surety Bonds Direct is a smart decision.
Let's look at $10,000 value of lost stock certificates. The rates in the table used to calculate the price are from really good to average. The row in red is what you would pay if you used ComputerShare for the same bond amount.
| Bond Amount | Premium Rate | Total Cost |
|---|---|---|
| $10,000 | 1.5% | $150 |
| $10,000 | 2.0% | $200 |
| $10,000 | 2.5% | $250 |
| $10,000 | 3.0% | $300 |
Why is a Lost Instrument or Lost Security Bond Required?
Lost Cashier's Check
In the case of a lost cashier's check, it's possible another individual may have found the lost check and cashed it.
Remember, the value of a cashier's check is tied to the bank's assets, not your account. So if they issue a replacement check and the original check is cashed, they would have realized a loss of the check amount.
The surety bond provides protection to the bank so if the original check is cashed, they can make a claim against the bond and get their money back.
Lost Stock Security
In the case of lost stock certificates, it's possible another individual can figure out a way to sell the stock for the current value.
While accomplishing this is much more difficult, the surety bond provides the issuing company (through the transfer agent) protection for the value of the stock stated in the letter approving the purchase of the bond.
The transfer agent would make a claim against the bond for financial reimbursement.
The Goal Is To Prevent Fraud
The process of requiring a lost instrument or security bond was created to prevent purposeful financial fraud.
And even though you're not committing fraud, it's so important you make sure your cashier's check is lost before you replace it using a lost instrument bond.
If a third party found and were able to cash a cashier's check or sell stock certificates, you as the bond purchaser would be responsible for paying back the surety (insurance company) the full amount of the bond.
This is similar to lost stock certificates.
How Long Does the Lost Instrument Bond Last?
The term of a lost instrument bond is "effectively forever", until the original asset is found, or until the individual state's laws deem the bond to have expired. This may be the case through a statute of limitations.
Again, this just stresses the importance of ensuring the cashier's check or stock certificate(s) are truly lost before you take action to have them replaced.
This can be complicated.
But the process of obtaining your bond is easy. Start the quote process today by clicking on your state and complete our online quote form.
You can call a bond specialist at 1-800-608-9950 to get the quote process started over the phone.
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