What Is a Bonded Title?

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about bonded titles. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

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FREE BONDED TITLE QUOTE

What Are Bonded Titles?

Bonded titles are the solution to a surprisingly common problem—not having a valid title to a motor vehicle, for whatever reason. Without a valid title, or a bonded title, it’s impossible to register a vehicle, sell it to someone else, donate it to charity, or otherwise transfer ownership to another party. 

Bonded titles look like regular vehicle titles except for one important thing—they bear the word BONDED in large, impossible-to-ignore letters. That “brand” makes it clear that the title is backed by a surety bond (more on that in a minute). Having a bonded title allows a vehicle owner to do anything that can be done with a regular, non-bonded title.

Every state has its own rules regarding bonded titles and its own process for obtaining one. You can read more about the following states below:

This article focuses on bonded titles in general and is not specific to any particular state.

Who Needs Them?

You will need a bonded title in order to register a vehicle in your own name or transfer ownership to someone else if you don’t currently have a valid title. There are a number of reasons why that might be the case. Perhaps you bought the vehicle from a private seller who did not give you a title at the time of the sale, even though you may have a receipt or a canceled check in your possession. Such documents are not, in themselves, sufficient proof that you own a vehicle for which you don’t have a valid title.

Another possibility is that the seller gave you a defective title, meaning there is something wrong with it that causes the DMV to declare it invalid. It may be improperly assigned by the previous owner, with a missing or forged signature or other required information that is missing or incorrect. Or the title could be damaged in such a way that critical information is illegible or missing. 

Or, you may have a valid title, but it was lost or stolen before you could register the vehicle in your own name. You don’t need a bonded title if the title was lost or stolen after the vehicle was registered to you. In such cases, all that’s required is a replacement title, which is much easier and cheaper to obtain than a bonded title.

What Are the Steps in the Bonded Titling Process?

As noted earlier, the specific steps in the process vary by state, but there are certain aspects of the bonded titling process that apply in every state that permits bonded titles. 

  1. First, you will need to make a compelling case that the vehicle does, in fact, belong to you. You’ll need to furnish whatever documents you have to help support your claim of ownership, such as a bill of sale, receipt, or canceled check. The application form for a bonded title typically includes a section that requires you to attest to your ownership and provide detailed information about how the vehicle came into your possession. In some cases you may need to provide a signed, notarized affidavit. 
  2. Additionally, every state has its own procedure for ensuring the vehicle is not reported as stolen and that there are no lien holders who can claim an ownership interest in it. Most states require the vehicle to be inspected by a police officer or DMV employee to verify the vehicle identification number (VIN) before processing an application for a bonded title.

Or 3) But the most essential requirement for obtaining a bonded title is purchasing a title bond—a type of surety bond that may also be referred to as a “lost title” bond. The required bond amount is also referred to as the bond’s “penal sum,” because it is the maximum financial penalty for violating the terms of the surety bond agreement. 

The penal sum for a given title bond depends on the current market value of the vehicle in question. How that value and the required bond amount are determined varies by state. In some states, the DMV relies on a Kelly Blue Book or similar published valuation source. In other states, the person applying for a bonded title must furnish a written statement of value from a state-licensed motor vehicle dealer.

A bonded title is good for a certain number of years, which corresponds with the duration of the title bond. A duration of three years or four years is typical. If anyone were to contest the ownership of a vehicle for which a bonded title has been issued, it is likely to occur within that time.

Why is a Title Bond Required?

In purchasing a title bond, you are guaranteeing that you are the vehicle’s legitimate owner. You are also agreeing to compensate any party who might show up during the time that the bond is in effect and be able to prove their ownership of the vehicle or the existence of a lien against it. 

Any number of things could happen to the vehicle after you got a bonded title. You could have sold the vehicle. You could have donated it or gifted it or even junked it. The vehicle could be damaged in an accident. Or stolen. At the very least, the former owner was deprived of the use of the vehicle during the time it was in your possession. And if it’s a lienholder who surfaces, that debt must be repaid. 

Without a title bond requirement, the DMV could be held liable for the loss incurred by the legitimate owner or lienholder. With a title bond in place, the DMV is indemnified against such financial liability.

What Happens if a Claim is Filed?

A title bond forms a legally binding contract among three parties known in the lingo of surety bonds as the “obligee,” the “principal,” and the “surety.”

  • The obligee is the state entity (usually the DMV) issuing the bonded title,
  • The principal is the person purchasing the bond and receiving the bonded title, and
  • The surety is the bond’s guarantor.

If at any time while the title bond is in force someone other than the principal proves an ownership interest in the vehicle in question, that party can file a claim against the title bond and get compensated for their loss, up to the bond’s full penal sum. It’s up to the surety to investigate and determine whether the claim is valid.

The terms of the surety bond agreement legally obligate the principal to pay all valid claims against the bond. However, the surety has guaranteed the payment of claims and typically will pay a valid claim initially. That does not relieve the principal of the obligation to pay. It merely shifts the obligation to repayment of the surety rather than direct payment of the claimant. The principal’s failure to repay the debt now owed to the surety can result in the surety taking legal action against the principal to recover the amount of the claim, plus court costs and legal fees. 

What Do They Cost?

In many of the states where bonded titles are permitted, the surety charges a fixed premium amount to provide a title bond for vehicles valued below a certain amount, usually $5,000 or less. In such cases, the premium rarely is more than $350. 

The title bond premium for vehicles of higher value is determined through an underwriting process. The biggest underwriting concern is the possibility of the surety not being repaid for claims paid on the principal’s behalf. 

The best predictor of that risk is the principal’s creditworthiness, as indicated by their personal credit score. The higher the principal’s credit score, the lower the risk to the surety but the reverse is also true. A low credit score is a red flag signaling a higher risk level. Low risk earns the principal a low premium rate while high risk warrants a high rate.

With good credit, the premium rate for a title bond should be in the standard market rate range of one to three percent. Credit-challenged individuals could receive a premium rate as high as ten percent.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about bonded titles. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE BOND TITLE QUOTE

What Are Bonded Titles?

Bonded titles are the solution to a surprisingly common problem—not having a valid title to a motor vehicle, for whatever reason. Without a valid title, or a bonded title, it’s impossible to register a vehicle, sell it to someone else, donate it to charity, or otherwise transfer ownership to another party. 

Bonded titles look like regular vehicle titles except for one important thing—they bear the word BONDED in large, impossible-to-ignore letters. That “brand” makes it clear that the title is backed by a surety bond (more on that in a minute). Having a bonded title allows a vehicle owner to do anything that can be done with a regular, non-bonded title.

Every state has its own rules regarding bonded titles and its own process for obtaining one. You can read more about the following states below:

This article focuses on bonded titles in general and is not specific to any particular state.

You will need a bonded title in order to register a vehicle in your own name or transfer ownership to someone else if you don’t currently have a valid title. There are a number of reasons why that might be the case. Perhaps you bought the vehicle from a private seller who did not give you a title at the time of the sale, even though you may have a receipt or a canceled check in your possession. Such documents are not, in themselves, sufficient proof that you own a vehicle for which you don’t have a valid title.

Another possibility is that the seller gave you a defective title, meaning there is something wrong with it that causes the DMV to declare it invalid. It may be improperly assigned by the previous owner, with a missing or forged signature or other required information that is missing or incorrect. Or the title could be damaged in such a way that critical information is illegible or missing. 

Or, you may have a valid title, but it was lost or stolen before you could register the vehicle in your own name. You don’t need a bonded title if the title was lost or stolen after the vehicle was registered to you. In such cases, all that’s required is a replacement title, which is much easier and cheaper to obtain than a bonded title.

As noted earlier, the specific steps in the process vary by state, but there are certain aspects of the bonded titling process that apply in every state that permits bonded titles. 

  1. First, you will need to make a compelling case that the vehicle does, in fact, belong to you. You’ll need to furnish whatever documents you have to help support your claim of ownership, such as a bill of sale, receipt, or canceled check. The application form for a bonded title typically includes a section that requires you to attest to your ownership and provide detailed information about how the vehicle came into your possession. In some cases you may need to provide a signed, notarized affidavit. 
  2. Additionally, every state has its own procedure for ensuring the vehicle is not reported as stolen and that there are no lien holders who can claim an ownership interest in it. Most states require the vehicle to be inspected by a police officer or DMV employee to verify the vehicle identification number (VIN) before processing an application for a bonded title.

Or 3) But the most essential requirement for obtaining a bonded title is purchasing a title bond—a type of surety bond that may also be referred to as a “lost title” bond. The required bond amount is also referred to as the bond’s “penal sum,” because it is the maximum financial penalty for violating the terms of the surety bond agreement. 

The penal sum for a given title bond depends on the current market value of the vehicle in question. How that value and the required bond amount are determined varies by state. In some states, the DMV relies on a Kelly Blue Book or similar published valuation source. In other states, the person applying for a bonded title must furnish a written statement of value from a state-licensed motor vehicle dealer.

A bonded title is good for a certain number of years, which corresponds with the duration of the title bond. A duration of three years or four years is typical. If anyone were to contest the ownership of a vehicle for which a bonded title has been issued, it is likely to occur within that time.

In purchasing a title bond, you are guaranteeing that you are the vehicle’s legitimate owner. You are also agreeing to compensate any party who might show up during the time that the bond is in effect and be able to prove their ownership of the vehicle or the existence of a lien against it. 

Any number of things could happen to the vehicle after you got a bonded title. You could have sold the vehicle. You could have donated it or gifted it or even junked it. The vehicle could be damaged in an accident. Or stolen. At the very least, the former owner was deprived of the use of the vehicle during the time it was in your possession. And if it’s a lienholder who surfaces, that debt must be repaid. 

Without a title bond requirement, the DMV could be held liable for the loss incurred by the legitimate owner or lienholder. With a title bond in place, the DMV is indemnified against such financial liability.

A title bond forms a legally binding contract among three parties known in the lingo of surety bonds as the “obligee,” the “principal,” and the “surety.”

  • The obligee is the state entity (usually the DMV) issuing the bonded title,
  • The principal is the person purchasing the bond and receiving the bonded title, and
  • The surety is the bond’s guarantor.

If at any time while the title bond is in force someone other than the principal proves an ownership interest in the vehicle in question, that party can file a claim against the title bond and get compensated for their loss, up to the bond’s full penal sum. It’s up to the surety to investigate and determine whether the claim is valid.

The terms of the surety bond agreement legally obligate the principal to pay all valid claims against the bond. However, the surety has guaranteed the payment of claims and typically will pay a valid claim initially. That does not relieve the principal of the obligation to pay. It merely shifts the obligation to repayment of the surety rather than direct payment of the claimant. The principal’s failure to repay the debt now owed to the surety can result in the surety taking legal action against the principal to recover the amount of the claim, plus court costs and legal fees. 

In many of the states where bonded titles are permitted, the surety charges a fixed premium amount to provide a title bond for vehicles valued below a certain amount, usually $5,000 or less. In such cases, the premium rarely is more than $350. 

The title bond premium for vehicles of higher value is determined through an underwriting process. The biggest underwriting concern is the possibility of the surety not being repaid for claims paid on the principal’s behalf. 

The best predictor of that risk is the principal’s creditworthiness, as indicated by their personal credit score. The higher the principal’s credit score, the lower the risk to the surety. TBut the reverse is also true. A low credit score is a red flag signaling a higher risk level. Low risk earns the principal a low premium rate while high risk warrants a high rate.

With good credit, the premium rate for a title bond should be in the standard market rate range of one to three percent. Credit-challenged individuals could receive a premium rate as high as ten percent.

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