Michigan Utility Deposit Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Michigan Utility Deposit bond.
At a Glance:
- Average Cost: Between 2% to 7.5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Determined on a case-by-case basis (more on this later)
- Who Needs it: Commercial customers that do not want to pay a cash deposit
- Purpose: To ensure the utility company receives compensation for financial harm if the business fails to pay their utility bills
- Who Requires a Utility Deposit Bond in Michigan: Consumers Energy
The Michigan Public Service Commission allows utility companies to require customers to pay a security deposit before initiating service. Security deposits help ensure utility companies do not suffer financial harm if customers do not pay their bills. In lieu of depositing cash, Consumers Energy allows commercial customers to purchase and maintain a surety bond.
What is the Purpose of the Michigan Utility Deposit Bond?
Consumers Energy requires commercial customers not wishing to deposit cash to purchase a surety bond as a prerequisite to obtaining utility services. The bond ensures that the company will receive compensation for financial harm if the customer fails to comply with the provisions laid out in the bond form. Specifically, the bond protects the utility company if the customer does not pay their monthly bills. In short, the bond is a type of insurance that protects utility companies if the customer fails to remit all required payments.
How Can an Insurance Agent Obtain a Michigan Utility Deposit Surety Bond?
BondExchange makes obtaining a Michigan 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? Gain access 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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How is the Bond Amount Determined?
Consumer Energy dictates that the bond amount must be equal to three times the customer’s estimated average bill (as determined by the company).
Is a Credit Check Required for the Michigan Utility Deposit Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Michigan 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 Michigan Utility Deposit Bond Cost?
The Michigan Utility Deposit bond can cost anywhere between 2% to 7.5% 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)||Bond Cost (1 month)|
|650 – 799||$500||$50|
|600 – 649||$750||$75|
*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.
Who May Purchase a Michigan Utility Deposit Bond?
Consumers Energy requires commercial customers that have used service for six months or less and have an unfavorable credit score or have missed a utility payment to submit a security deposit. Instead of depositing cash, these customers may opt to purchase a surety bond.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How do Consumers Energy Commercial Customers Obtain Utility Services?
Commercial customers of Consumers Energy must navigate several steps to obtain utility services, as outlined below.
Step 1 – Contact Consumers Energy
To start service, businesses must contact Consumers Energy at (888) 450-9143. A customer service representative will walk the businesses through the application process and answer any questions they may have.
Step 2 – Purchase a Surety Bond or Deposit Cash
Businesses with poor credit will be required to purchase a surety bond or deposit cash before receiving service (limits outlined above). Additionally, businesses that miss mish a payment within their first six months will also be required to purchase a bond or deposit cash.
How Do Michigan Utility Customers File Their Bonds?
Utility customers in Michigan should submit their completed bond forms, including the power of attorney, to Consumers Energy at the following address:
One Energy Plaza
Jackson, MI 49201
The surety bond requires signatures from the surety company that issues the bond, the customer, and a witness signature from Consumers Energy. 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 Michigan Do to Avoid Claims Against Their Bonds?
To avoid claims on their bonds, utility customers in Michigan must ensure they pay their utility bills on time and in full.
What Other Insurance Products Can Agents Offer Utility Customers in Michigan?
Michigan only requires 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.