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What is a Surety Bond?
A “Surety Bond” is similar to insurance and is purchased on a vehicle lacking the proper paperwork. A bonded title allows you to title the car as you usually would. The bond promises to pay expenses incurred should any other individual or entity lay a claim.
This bond is attached to the VIN of the car, and in most cases, a government official (highway patrol) comes out and verifies the VIN to ensure that the car being titled is the one in question. Most insurance companies or companies dedicated to surety bonds can provide a bond for a nominal fee (generally under $100) if the car's value is under $5,000 or so. Anything higher than that amount may require additional underwriting.
The bonded title is temporary because it allows a certain number of years (each state can advise you what that duration is) for a third party to file a claim. Most states demand that a bond be purchased for at least a year. Others, like Mississippi, extend that time to 3 years or more).
When Do You Need a Surety Bond?
A surety bond is needed when you run across a vehicle that has been rusting in a field or sitting in a garage where the car is too old to have any paperwork attached to it. In these situations, most states recognize that finding a rightful owner would be next to impossible, so it allows a path to help new owners register their cars.
However, there are other reasons to secure a bonded title.
- If you discover that you have bought a car from an auction, inheritance, or one passed down from a family but not receiving a title at the point of sale.
- If you discover that a different person is on the title than the person who sold you the car.
- If you lose paperwork in a fire or flood to a car, you purchase and cannot secure it before it gets transferred. (Although, in most states, you can get a duplicate title if the car is already in your name).
How Do I Secure a Surety Bond?
There are steps to obtaining a bond before you head up to the DMV to get your vehicle titled.
Make Sure the Car has No Leins or is Not Stolen.
While it may be impossible to determine precisely, you should try to ensure the car is not stolen or used in a crime. The best way to run the VIN is through the National Insurance Crime Bureau to see if the car has a history or has been reported stolen and never recovered. Another free link can be found at bumper.com. This VIN check will also provide a complete car history, including accidents and other valuable information.
Contact your DMV for a value on the vehicle.
When you contact your DMV, the officials can give you a value and the amount of bond you need to purchase. Most states require a bond that is at least twice the value of your car.
It should be noted that not all states allow you to title a bonded car.
Delaware, the District of Columbia, and Kansas are not accepting bonded titles. In Kansas, you can secure a title for an antique car with a bill of sale and a couple of forms and fees. The state does not recognize bonded titles in Ohio and Indiana, but you can secure a court-appointed title. Always contact your state’s DMV.
Secure A Bond From a Company
You will need to enter into a contract with the surety bond company and wait for them to send you the bond before heading to the DMV. (You will need to show the DMV that you have taken out of bond on the car). You will need verification that the car’s VIN has been run and hasn’t been tagged with a problem.
Take the Info to DMV
Be prepared to give the bonded letter to the DMV in exchange for the bonded title. You can expedite the process by ensuring that other details are correct, like the name on the new title matching your driver’s license, the car’s value verified by a letter from DMV, current address, etc.)
Keep the Paperwork in a Safe Place
It goes without saying that your paperwork should be kept in a safe place where you can refer to it should the need arise. Should a claim be filed against you, you will need to prove that you have done everything in your power to ensure that there was no legal owner to the vehicle.
What Happens if a Claim is Made on a Bonded Car?
The claim will trigger an investigation usually initiated by the bonding company. The claimant would state that you had no authority to title the car because you did not own the vehicle. They did. (The implication is that you intentionally took property that belonged legally to them). Most courts take this kind of thing very seriously, so you should plan on having your paperwork in order should you have to appear in court. If the claim is successful and the investigation finds validation for the claim, you can expect a judgment to go against you. You could be responsible for paying for damages and legal expenses. Sometimes the bonding company will pay for you and then send you a bill. Either way, be prepared to open your wallet.
