How to Cash an Indemnity Bond

An indemnity bond is a guarantee of reimbursement for the holder in the event of loss. Indemnity bonds are used to ensure a party will perform as agreed in a contract. The bonds are also commonly required before a lost legal document is replaced, such as a car title. In this type of agreement, there are three parties involved. The principal is the person purchasing the bond. The obligee is the person benefiting from the bond. The surety, also referred to as a guarantor, charges a fee to assume the risk of the indemnity bond's value.

Step 1

Confirm a loss has occurred. For example, if someone fraudulently assumes ownership of your vehicle, the local department of motor vehicle will likely have the indemnity bond on file that the principal was required to purchase.

Step 2

Act in a timely manner. Some banks and departments only keep indemnity bond records on file for a limited amount of time. For example, the North Carolina Division of Motor Vehicle states that indemnity bonds remain on file for three years.

Step 3

Contact the principal to discuss the issue. You must request payment for loss directly from the other party before the indemnity bond company will pay. Since indemnity bonds can be used for a variety of agreements or contracts, negotiating is easier in some cases than others.

Step 4

Call the surety company if the principal fails to pay for the loss. Prepare to present your evidence to support the claim. You will need to prove you lost money due to the principal's failure to perform as agreed.

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