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What is a Utility Bond?

A utility bond is as a financial guarantee required by a utility company prior to any services being rendered. This bond is in place to ensure that your business is entering into a dependable working relationship and will also make all of the necessary payments to the utility company on time.

There are three parties involved in a utility bond are:

  • The Principal (That’s your Business)
  • The Lender (The Utility Company)
  • A Surety Bond Provider (Also Known as the Utility Bond)

Some particular circumstances warrant an individual needing to acquire a utility bond which are primarily reserved for property owners that may have a considerable history of late payments or non-payments altogether. In most cases, it will be a business that requires this promissory note, rather than an individual for their place of residence. This safeguard protects the consumer and is mandated by state or government authorities to ensure they won’t be delinquent in the future. Utility bonds have become more popular in recent years as the market is beginning to open up more and more with new innovations and technology advancement.

Utility Bond FAQs

What are Utility Bonds For?

When a utility customer is expected to consume a large quantity of energy, the utility company wants to make sure that they will be paid the entirety of what is owed and that it is on time in relation to usage.
Companies that most often meet these requirements are new entities that do not have a substantial financial and operating history, companies in the manufacturing sector, restaurants, and any other corporation that will be utilizing a considerable amount of power.

In the event that a company isn’t able to pay on time, the utility company has legal grounds to file a claim against the bond to receive the payment. The surety will then pay the amount of the claim and the bonded party which is the consumer who holds the bond. They are required to reimburse the surety for the claim amount.

How much are Utility Bonds?

Utility bonds range in cost depending on various factors including the specific utility company in which you are using.

Most utility companies calculate the cost of a surety bond by:

*The Time Period for the Services
*The Estimated Costs for that Period
*A Percentage of those Services

That percentage will end up being only a fraction of the overall amount ranging between 1% and 5%. This working percentage comes from a few different variables -- the most critical being your personal credit score and financial history.

It is also worth mentioning that sufficient proof of your liquidity and assets is a big determinant to what percentage you end up having to pay.

Difference between bonds and insurance?

You need to fully understand that there is a distinct difference between a bond and commercial insurance. All surety bonds protect the interests and investments of the consumer, lender, or owner (of a project or building), while commercial insurance acts as an insulation layer from businesses and help those who risk being sued.

The main difference between an insurance policy and a bond is which party is financially replenished when a claim is made against either policy.

Insurance: This restores the principal (the insured or bonded party) back to the original state they were before the claim was filed.

Bond: This formal agreement ensures that the utility company will not be at a loss if the client does not pay any or all of the billed utilities. The surety will pay the utility company and then the obligee will be required to pay back the surety. The faster a claim is resolved the better as it can hinder you from getting bonds in the future.

Can I qualify for a Utility Bond with bad credit?

If you are trying to figure out what your deductible might be, it is important to factor in your insurance premium. The higher your deductible is, the lower your premium will be. When you finish paying your deductible amount, the insurance company pays the rest taking into consideration that the constraints of the policy are met. In the case of a surety bond, there is no deductible. If a claim is made and the bond company pays for it, then the principal must pay the entire bulk amount back to the company.

Because a utility bond is designed to protect the supplier and not the consumer, a consumer with poor credit is a risky candidate for a bond. This means that it can be difficult to get a utility bond with a bad credit score. Having multiple bankruptcies, tax liens, and civil judgments will make it quite difficult to secure a lower premium bond or even a bond at all in a lot of cases. This is just another reason to keep your credit history as spotless and monitored as possible.


Request Your Utility Bond

What you need to know about Surety Bonds

Utility Bond Requirements

The government has rules and regulations that require many businesses in many different industries to secure various license and permit bonds in order to run their business legally. This general liability insurance is looked as a necessity for these corporations to make sure they are guaranteed payment and can operate in a consistent, streamlined manner. A utility bond is required before utilities will be turned on by any provider.

Utility Bond Claim

A claim on your utility surety bond is something you want to avoid. Whenever a claim is shown, the surety will cover all of those costs up to the punitive sum. If this does occur, you will have to pay back the surety in full. Do your best to try and avoid claims at all costs, because it will have an adverse effect on your business and credit history.

It can be a process to apply for a utility bond and that’s why Surety Place is here for you. We want to make sure that you are comfortable and we can answer all the questions you still may have.


The Surety Place, previously known as Surety Placement Services, was founded in 2002 and our vision was to provide businesses and agencies with reliable and professional bonding services with a personal touch. We are proud to have become one of the leading surety bond agencies known for our excellent customer service and top rated reputation. We work hard to maintain our reputation for being the best, so call to experience the Surety Place difference and we will help you acquire a utility bond in no time.

A People First Company

We establish a relationship with you in order to truly understand your business focus whether large or small, complicated or difficult.  As one of the only true specialists within the industry we supply access, partnerships and specialty programs with numerous “A” rated sureties across the nation. We are here to help you service all your bonding needs with no appointments or contracts necessary.

Because of our industry knowledge and expertise coupled with our ever increasing specialty programs, we have the unique ability to write your bonds when no one else can, and because of our relationship with you we will stand behind you in support to achieve your agency or business objectives.

Over 45 Years of Combined Surety Experience

Our dedicated account managers are highly trained underwriters who provide our agents and clients a tailored bonding solution for their individual or corporate needs. In today’s marketplace, surety access can be limited; but with Surety Place as your partner, you’ll find the white-glove service you have been looking for.

No matter the size of the bond or how complicated, Surety Place is built to find an answer. Poor credit, financial hardship, fast growth, or just getting your company off the ground? We have options for you too.

We understand business. We also understand how difficult it can be when something that seems like such a small piece of the puzzle gets in the way of closing the deal or moving forward. We take that pressure off your mind so YOU can get back to work.

Need help growing your bond department?

At The Surety Place, we pride ourselves in our customer service! If you have any questions regarding a bond placement, give us a call.