Indiana Utility Deposit Bond: A Comprehensive Guide
January 27, 2022
This guide provides information for insurance agents to help their customers obtain an Indiana Utility Deposit bond.
At a Glance:
- Average Cost: Between 2% to 15% of the bond amount per year based on the applicant’s credit
- Bond Amount: Determined on a case-by-case basis
- Who Needs it: Certain businesses seeking to activate utility services in Indiana
- Purpose: To ensure utility companies receive compensation for financial harm if the consumer fails to pay their utility bills
- Who Requires Utility Deposit Bonds in Indiana: Utility companies in Indiana that provide services to the general public
Utility companies in Indiana often require customers expected to generate large monthly bills to pay a security deposit before initiating service. The security deposit protects utility companies from losses if the consumer fails to pay their monthly bills on time and in full. However, certain utility companies in Indiana allow customers to purchase and maintain a surety bond in lieu of depositing cash. Unlike most surety bonds, utility deposit bonds are not required by a government agency but by the utility company providing the service.
What is the Purpose of the Indiana Utility Deposit Bond?
Certain utility companies in Indiana require consumers that do not wish to pay a security deposit to purchase a surety bond as a prerequisite to obtaining utility services. The bond ensures that the utility company will receive compensation for financial harm if the consumer fails to comply with the provisions laid out in the bond form. Specifically, the bond protects the utility company if the consumer does not pay their monthly bills. In short, the bond is a type of insurance that protects utility companies if the consumer fails to remit all required payments.
How Can an Insurance Agent Obtain an Indiana Utility Deposit Surety Bond?
BondExchange makes obtaining an Indiana Utility Deposit bond easy. Simply login to your account and use our keyword search to find the “utility” 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 (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.
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Which Companies Allow Utility Deposit Bonds in Indiana?
The following Indiana utility companies allow customers to purchase a surety bond in lieu of depositing cash:
Indiana Michigan Power
Commercial customers must either deposit cash or purchase a surety bond before initiating service. The bond amount must equal twice the location’s average monthly bill during the previous 12 months. If the location is a new construction, the bond amount is determined based on the location’s square footage and estimated usage.
Agents can contact Indiana Michigan Power here.
Duke Energy Indiana
Businesses whose security deposit exceeds $500 may opt to purchase a surety bond in lieu of depositing cash. Duke Energy determines the required bond amount on a case-by-case basis based on the business owner’s credit score and estimated usage.
Agents can contact Duke Energy here.
Is a Credit Check Required for the Indiana Utility Deposit Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Indiana Utility Deposit bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the applicant’s credit.
How Much Does the Indiana Utility Deposit Bond Cost?
Indiana Utility Deposit bonds required by American Electric Power can cost anywhere between 2% to 15% of the bond amount per year. Insurance companies determine the rate based on a number of factors, including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $10,000 bond requirement.
$10,000 Utility Deposit Bond Cost
|Credit Score*||Bond Cost (1 year)|
|680 – 799||$300|
|650 – 679||$500|
|600 – 649||$750|
|550 – 599||$1,500|
Indiana Utility Deposit bonds required by Duke Energy Indiana are priced differently and can cost anywhere between 2% to 7.5% of the bond amount per year. The chart below offers a quick reference for the approximate bond cost on a $10,000 bond requirement.
|Credit Score*||Bond Cost (1 year)|
|650 – 799||$500|
|600 – 649||$750|
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Do Indiana Utility Customers File Their Bonds?
Utility customers in Indiana should submit their completed bond forms, including the power of attorney, to the company requiring the bond. The surety bond requires signatures from both the surety company that issues the bond and from the customer. The surety company will include the following information on the bond form:
- Name and address of the entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
What Can Utility Customers in Indiana Do to Avoid Claims Against Their Bonds?
To avoid claims on their bonds, utility customers in Indiana must ensure they pay their utility bills on time and in full.
What Other Insurance Products Can Agents Offer Utility Customers in Indiana?
Utility companies in Indiana only allow businesses to be bonded. As such, agents can offer their customers general business and liability insurance in addition to the utility deposit bond. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
Should Your Customer Purchase a Surety Bond or Deposit Cash?
Surety bonds are generally considered the better option for businesses, as they free up working capital that would otherwise have to be deposited with the utility company. For more information on whether your customer should purchase a bond or deposit cash, check out our Surety Bonds vs. Letters of Credit article here.