A lost instrument bond is an agreement between the owner and a supplying firm to replace an instrument that has been lost or stolen. Part of the agreement guarantees the stock or bondholder that the issuing party be able to replace the financial instrument.
When any individual or organization is missing (due to theft or it being misplaced) a stock certificate, a savings bank book, promissory note, certified check, or a similar document, the issuer will not deliver a duplicate until the owner furnishes a lost instrument bond. If a duplicate document is issued, the bond requires that if the original document is found, it will be submitted to the surety company.
Companies provide lost instrument bond services for a term of one-year which they can later renew for multiple years. The premium is 1% of the bond amount for professional lenders and 2% of the bond amount for all other applicants. There are generally two types of lost instrument bonds:
Fixed Penalty bonds are needed when the items lost are certified checks, certificates of deposits, or any items with a fixed value.