Utility Bond FAQs

What are Utility Bonds For?

When a utility customer is new or 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 needs these bonds are generally new entities that do not have a substantial financial and operating history, companies in the manufacturing or IT sector, restaurants, laundromats, and any other corporation that will be utilizing a considerable amount of power.

In most cases, it will be a business that is required to place this guarantee, rather than an individual for their place of residence. 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 the event that a consumer 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 may then have to pay the amount of the claim and the bonded party which is the consumer who holds the bond, will be required to reimburse the surety for the paid 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, bond amount, credit and financial history.

Most utility companies calculate the bond amount required by:
- The Time Period for the Services
- The Estimated Costs for that Period
- Credibility, Risk, Financial Liquidity of Customer

The Surety Company will then provide the utility bond at a cost of a percentage of the total bond amount required by the utility company. That percentage will end up being only a fraction of the bond amount. This bond cost comes from a few different variables -- the most critical being your personal credit score and financial history. Sufficient proof of your liquidity and assets is a big determinant to what percentage you end up having to pay.

It is also worth mentioning that the alternative to paying for a utility bond is to pay a traditional lump sum utility deposit, which would require a lot more money upfront and likely be more costly overall. By securing a utility deposit, you only need to pay a fraction of the total bond amount in annual premium payments.

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 of the consumer, 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: Claims made by and financial restored to the Principal (the insured or bonded party) back to the original state they were before the claim was filed.

Bond: Claims made by and financial restored to the Obligee (utility company) to ensure they 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 Principal 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?

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 some cases. This is just another reason to keep your credit history as spotless and monitored as possible. To qualify for a utility bond with poor credit, higher premiums and a requirement for additional financial backing may be expected.

If you are trying to figure out what your deductible might be or might be affected by credit and how it impacts your premium, this only applies to insurance and not bonds. 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 amount back to the company.

Request Your Utility Bond

What you need to know about Surety Bonds

Utility Bond Requirements

Utility bonds requirements are set by the utility provider and each provider may set their own requirements. A utility bond may required before utilities will be turned on by any provider, particularly for entities with expected high energy usage and poor or insufficient payment history such as first-time or high-risk customers. The utility provider will inform you during the application process if they require a utility bond prior to providing services, their calculated bond amount to meet their requirements, and what documentation is required to complete the application to activate services.

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.

Connect with our team!

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.

Utility Bond

What is a Utility Bond?

There are three parties involved in a utility bond are: