Information on the Role of a Surety Company in Providing Bonds

February 5, 2024 / Notary Association of America

A Surety company, in the context of notary services, is essentially an insurance agency that specializes in providing notary bonds. A notary bond, also known as a surety bond, is a contract among three parties: the principal (the notary), the obligee (the person for whom the notarization is done), and the surety (the insurance company). The bond ensures that the notary will fulfill their obligations in performing notarizations.

Here's a breakdown of the key elements:

  1. Principal (Notary): The individual who will be performing the notarization.
  2. Obligee: The person for whom the notarization is being done.
  3. Surety (Insurance Company): The company that issues the surety bond, providing financial backing to ensure that the notary's obligations are met.

The surety bond serves as a form of protection for the public. In the event that a notary makes a mistake in notarizing a document, the insurance company (surety) is obligated to cover the damages, up to a specified amount known as the penal sum. The notary, as the principal, pays a premium to the Surety company in exchange for this financial backing.

However, it's important to note that while the bond provides protection to the public, the notary is ultimately responsible to the surety company for any amount paid out in case of a claim. The surety company may seek reimbursement from the notary, including legal fees.

In addition to the notary bond, the article mentions Errors and Omissions Insurance (E&O Insurance). E&O Insurance is a separate protection for notaries in case they make a mistake on a notarization. It acts as a safeguard for the notary against the financial consequences of errors or omissions, providing coverage beyond what the notary bond may offer.

Being a Surety agent or operating a Surety agency requires compliance with state statutes and regulations. Surety companies must be staffed by licensed insurance agents and adhere to strict standards governing insurance companies. There are specific rules and regulations that Surety companies must follow when assisting individuals in becoming notaries or renewing notary commissions.

It's important for Surety companies to be transparent in their pricing and advertising, following state statutes to avoid misleading consumers. Surety agencies cannot imply an affiliation with the state, and they must disclose individual item prices when offering packages.

In summary, a Surety company in the notary context is an insurance agency that issues notary bonds, providing financial backing and protection to the public in case of notarial mistakes.