Texas Lost Title Bond: A Comprehensive Guide

September 28, 2021

This guide provides information for insurance agents to help their customers obtain a Texas Lost Title Bond

At a Glance:

• Average Cost: Minimum of $100 or 1.5% of the bond amount, whichever is greater
• Bond Amount: One and a half times the vehicle’s value
• Who Needs it: Vehicle title applicants in Texas who do not have adequate proof of ownership
• Purpose: To ensure the rightful vehicle owner does not suffer financial harm if the title applicant does not actually own the vehicle
• Who Regulates Lost Title Bonds In Texas: The Texas Department of Transportation

Background

Texas statute 501.053 requires residents who do not have adequate proof that they own their vehicle to purchase a surety bond prior to obtaining a duplicate title. The Texas legislature enacted the bonding requirement to ensure that the rightful vehicle owner will receive compensation if the title applicant does not actually own the vehicle. The bond will be active for three years from the date of issuance and must be in an amount equal to one and a half times the vehicle’s value.

What is the Purpose of the Texas Lost Title Bond?

Texas requires residents to purchase a surety bond as part of the application process to obtain a bonded title. The bond ensures that the rightful vehicle owner will not suffer a financial loss if the title applicant is seeking to obtain the title fraudulently. If the title applicant is engaging in fraud, then the rightful vehicle owner can file a claim against the bond and receive compensation up to the full amount of the bond. In short, the bond acts as a safeguard against people attempting to obtain ownership of a vehicle through unethical means.

How Can an Insurance Agent Obtain a Texas Lost Title Bond?

BondExchange makes obtaining a Texas Lost Title Bond easy. Simply log in to your account and use our keyword search to find the “title” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

How is the Bond Amount Determined?

Texas statute 501.053 dictates that the bond amount must be equal to one and a half times the vehicle’s vehicle. To determine the vehicle’s value, the Department of Motor Vehicles will either use the Standard Presumptive Value (SPV) from their website or utilize the National Automobile Dealers Association (NADA) appraisal guide. If no value is available through either SPV or NADA, title applicants may have their vehicle appraised by a licensed auto dealer or insurance adjuster. The appraisal must be completed on this form.

Is a Credit Check Required for the Texas Lost Title Bond?

Surety companies will not conduct a credit check for bonds that are less than $25,000. At limits over $25,000, surety companies will review the applicant’s credit standing to determine qualification for the bond. For larger bond amounts, applicants with poor credit may be subject to a higher rate. Generally, most carriers want to understand how the applicant came to have ownership of the vehicle.

How Much Does the Texas Lost Title Bond Cost?

The Texas Lost Title Bond costs either $100 or 1.5% of the bond amount, whichever is greater (rates may vary for bonds greater than $25,000).

Who is Required to Purchase a Bond?

The Texas Department of Motor Vehicles requires title applicants to purchase a surety bond if the applicant cannot present the department with tangible proof that they own the vehicle and are unable to contact the vehicle’s previous owner. Lost title bonds are typically required for the following reasons:

• The vehicle has never been titled
• The applicant never received the title
• The previous owner never titled the vehicle
• The applicant has the title but there is an error in the title transfer
• The applicant purchased an unclaimed/abandoned vehicle and is not a bonded agent

Vehicles that are considered junk or nonrepairable are ineligible for a title.

How do Texas Residents Apply for a Bonded Title?

To apply for a bonded title, Texas residents must complete the following steps:

Step 1 – Determine Bond Eligibility

Texas does not require all title applicants to obtain a bonded title, and usually only does so as an absolute last resort. To determine their eligibility for a bond, bonded title applicants must submit a completed bonded title application, including proof of vehicle ownership and a valid ID, to their local DMV office.

Step 2 – Have the Vehicle Inspected (Out of State Vehicles Only)

Bonded title applicants possessing out-of-state vehicles must have their vehicle inspected by a Texas certified Safety Inspection Station. If the vehicle has never been titled or registered in Texas then it must undergo a vehicle identification number (VIN) inspection conducted by an auto theft investigator.

Step 3 – Purchase a Surety Bond

Once the DMV determines the applicant needs a bonded title, they will provide the applicant with a Notice of Determination for a Bonded Title form, which will contain the required bond amount. After receiving this form, bonded title applicants must purchase and maintain a surety bond in an amount equal to one and a half times the vehicle’s value.

Step 4 – Complete the Application

After purchasing their bond, bonded title applicants must return the completed notice of determination form, their surety bond, and a completed title application to their local DMV office.

How Do Texas Bonded Title Applicants File Their Bond?

In Texas, bonded title applicants should submit the completed bond form, including the power of attorney, to their local DMV office. The Texas Lost Title Surety Bond requires signatures from both the surety company that issues the bond and the bonded title applicant. The surety company should include the following information on the bond form:

• The legal name and address entity/individual(s) buying the bond
• Surety company’s name and address
• Bond amount
• Vehicle information
• Date the bond goes into effect

What Are the Insurance Requirements for Bonded Title Applicants in Texas?

Texas requires all motor vehicle owners to purchase auto insurance with the following minimum limits:

• $30,000 per person
• $60,000 per accident
• $25,000 property damage per accident

Bonded title applicants must purchase and maintain a surety bond in an amount equal to one and a half times the vehicle’s value.

How Can Texas Residents Avoid Claims Against Their Lost Title Bond?

To avoid claims against their bond, bonded title applicants in Texas must ensure that they are the rightful owners of the motor vehicle.

What Other Insurance Products Can Agents Offer Bonded Title Applicants in Texas?

Texas requires all motor vehicle owners to purchase auto insurance. Bonds are our only business at BondExchange, so we do not issue other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.