Utility Bond

Utility bonds, often required by utility companies, serve as financial safeguards to guarantee that business consumers will pay their utility bills on time. The consumers are usually businesses that require a high amount of energy, such as electricity or water. These bonds are essential tools for utility providers to ensure they receive payment, especially when dealing with businesses or individuals who have no established payment history or a history of non-payment. For example, a homeowner may be asked to take out a utility bond if they have a history of late payment. In this way, the utility company can file a claim and get repayment. The homeowner then has to repay the surety company. 

While not mandated by the government, utility bonds are an effective way for utilities to manage their revenue and mitigate financial risks associated with non-payment.

Quick Overview

Bond Amounts:

  • Every utility company sets its own bond amounts
  • The bond is paid on an annual basis


  • 1-5% of the bond amount. This rate can vary based on individual credit profiles and the specific utility provider's requirements.
Example Utility Bond Form
Example Utility Bond Form

Utility Bond FAQs 

What are Utility Bonds, and why are they required? 

Utility bonds serve as financial guarantees required by utility companies to ensure that their customers pay their bills on time and in full. 

Utility bonds are like other surety bonds and involve three key parties:

The Principal: This is the business and individual that obtains the bond 

The Obligee: This is the entity requiring the bond. In this case, it is the utility company (in most surety cases, it is the government)

The Surety: This is the underwriting company that provides the bond. 

If a claim is filed due to nonpayment, the surety company will investigate the claim. If the claim is valid, then the surety company will pay the utility company for the unpaid costs. Then, the principal (the individual or business), will pay the utility company back. 

The purpose of the third party, the surety, is to add a layer of security to the utility company if the principal fails to meet their commitments. This mitigates risk and is more economically efficient for the obligee. 

Who needs to purchase Utility Bonds?

Utility bonds are required for businesses, especially those new to utility services since they don’t have a repayment history with the provider. A new restaurant or manufacturing company may need a utility bond because they are expected to consume large amounts of power. Sometimes, homeowners with a history of late payments may be asked to obtain utility bonds.

The specific criteria for who needs to purchase a utility bond change depending on the utility company. The utility company will be the one to decide the bond amounts, usually depending on how much energy is expected to be spent. 

Are Utility Bonds mandatory for all customers?

Utility bonds are not mandatory for every customer. They are typically required when the utility provider wants assurance that customers will meet their payment obligations. Both business and individual customers may be asked to obtain utility bonds.

What are the requirements for obtaining a Utility Bond?

Utility bond requirements vary depending on the utility company and individual circumstances. To obtain a utility bond, you have to apply. To obtain the best deal for a premium, be as specific as possible in your application. Avoid mistakes or inaccuracies. During the application, you will be asked for your social security number, which will be used to check your credit. You won’t have to worry about your credit score being harmed since we conduct a soft credit check. You can expect approval within 24 hours, which will include a quote for your premium rate. Your credit history, payment history, and the specific utility company’s policies will determine your eligibility and the bond’s costs. 


What is a premium rate, and how does it affect my bond’s cost?

A premium rate is the price you will pay for your bond. The cost is usually 1-9% of the bond cost set by the utility company. It may vary depending on the credit profile. While the cost may vary, opting for a utility bond is often a more economical choice compared to paying a traditional deposit, which tends to be higher. 

Traditional deposits are usually more costly, so utility bonds are a more financially appealing option. A traditional deposit is often called a security deposit or an upfront payment made by customers. The utility company holds the deposit as a financial guarantee. 

Check with your utility company to see if they have other alternative options that apply to your specific situation. 

How do I get a Utility Bond? 

Getting a utility bond is a straightforward process. First, complete the application online here. Make sure to include the most accurate information to avoid delays. 

You will need to provide information about the bond amount requested by your utility company, the name of the utility company (obligee), proof of up-to-date utility bill payment history, and your name and social security number. Your social security number will be used to run a soft credit check, which will not harm your credit score. 

After this, a team member will contact you within 24 hours to confirm the details and get your bond sent out to the utility company. Once your bond is paid, the surety company will issue the bond and confirm your coverage.

We will let you know when it is time to renew your bond 60 days in advance to help you avoid disruptions in your utility services. 

Can I qualify for a Utility Bond if I have bad credit?

Yes. Even if your credit history is less than perfect, you can qualify for a utility bond. However, this will affect your premium rate since individuals or businesses with poor credit tend to have higher premium rates. The bond, at worst will fall in the range of 5%- 9% of the bond’s total value, depending on the severity of the credit issues.