While a cash deposit may be required of residential customers who have never had a utility account before, a business with no utility payment history or a history of late utility payments is likely to be required to purchase a utility bond. Commercial customers with high utility use, such as retail stores, car washes, office buildings, skating rinks, apartment complexes, manufacturing facilities, and so on, are likely to be required to purchase a utility bond.
Utility Bonds for Service Accounts
Businesses opening utility accounts need a utility bond when a provider requires payment assurance instead of a cash deposit. Surety Bonds Agent supports clients in 50 states with clear quote assistance. Apply online for a utility bond quote.
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about bond type
What Are Utility Bonds?
Utility bonds provide a way for electric, natural gas, and water companies to make sure that certain commercial customers pay their utility bills. As you can imagine, commercial establishments like factories, big box stores, and other “high-use” businesses have monthly utility bills many times larger than those of residential customers.
When these large accounts become delinquent, it can take a lot of collection activity and even legal action on the part of the utility company to get paid. Sometimes, these bills never get paid, especially if the business becomes insolvent and goes belly up. Understandably, utility companies may require these commercial customers to purchase a utility bond before connecting new services for them.
A utility bond serves as the business owner’s guarantee to pay the business’s utility bills in full. Failure to do so can result in the utility company filing a claim against the bond to recover the outstanding amount due on the customer’s utility account.
Who Needs Them?
How Do They Work?
A utility surety bond agreement is a legally binding contract joining three parties:
- The utility company is the obligee (the party requiring the bond).
- The utility customer is the principal (the party purchasing the bond).
- The surety bond company is the party underwriting and issuing the bond, also known simply as the surety.
A utility surety bond functions like a short-term line of credit that the principal can access to cover claims. When the obligee files a claim against a utility bond, the surety will investigate the claim, and pay it if it is found to be valid. By paying the claim on behalf of the principal, the surety is extending credit to the principal. The principal is required by law to repay the full amount, plus any applicable interest or legal costs. Installment payments over a period of time may also be allowed, depending on the surety’s policies.
costs
What Do They Cost?
Two factors enter into the cost of a utility bond: the required bond amount and the premium rate. The obligee (the utility company) sets the bond amount for each principal based on the principal’s projected utility use. The surety assigns a premium rate that is based primarily on the principal’s personal credit score and financial stability.
With good credit, the premium rate is typically in the 1% to 3% range, but a principal with poor credit could pay a higher percentage of the required bond amount.
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We proudly serve all 50 states, offering a full range of surety bonds. To buy surety bonds online:
- Choose your state
- Choose the bond type you need
- Apply online to request a free quote
There’s no obligation, and we can often help you get bonded in 24 hours or less.
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How Do Utility Bonds Work?
-
Choose Your Bond Type
Select the bond you need — commercial, contract, or any specialized bond. We help you find exactly what is required in your state.
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Submit a Quick Application
Complete a short online form. It only takes a few minutes, with no extra paperwork or long verification steps.
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Get Approved & Receive Your Bond
Get fast approval and receive your bond instantly by email. Your document is ready to use right away.
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Why Work With Us?
Easy Application Process
Simply fill out our convenient online application form to get started.
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We work with a wide range of carriers to provide many options to our clients.
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As an independent agency, we can leverage our carrier network to find the most competitive rates for the bonds you need.
Quick Turnarounds
We work to get you bonded as quickly as possible, often in 24 hours or less.
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Our experienced surety bond agents provide personalized assistance to help you understand your bonding requirements and options.
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Request an online quote today! Or speak with one of our knowledgeable surety bond agents about the commercial bonds you are interested in.