Utility Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Learn everything you need to know about utility bonds below, and request a quote today. 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 UTILITY BOND QUOTE

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?

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.

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.

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.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Learn everything you need to know about utility bonds below, and request a quote today. 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 UTILITY BOND QUOTE

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.

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.

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.

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.

REQUEST A QUOTE

The best way to find out what a utility bond will cost for you is to simply request a quote. Request a quote online or call today to speak with one of our surety bond experts about the bonds you need for your business.