• May 24, 2022

What are Bank Depository Bonds? (And How They’re Used)

What are Bank Depository Bonds? (And How They’re Used)

What are Bank Depository Bonds? (And How They’re Used) 1024 688 Patrick J. Thomas Agency

A bank depository bond, also known as a depository bond, is a type of protection for people or organizations who deposit large amounts of money into a bank, which normally exceeds the traditional insurance coverage obtained by the bank. 

What exactly is a bank depository bond? How does it work and who does it protect? If you are a financial institution or a person or organization who has a large sum of money to deposit, this is what you need to know about the protection provided by bank depository bonds. 

What is a Bank Depository Bond?

A bank depository bond is a type of surety bond that provides insurance for account holders of a specific bank. The bond provides insurance in the event that the account holder’s balance exceeds the amount protected by the Federal Depository Insurance Corporation (FDIC).  

The standard amount covered by FDIC insurance is $250,000 per depositor, per insured bank, for each account ownership category. This insurance protects account holders against loss of funds should a bank fail to protect the funds or is forced to close. Any amount over the $250,000 limit is generally not covered, which is why depository bonds are essential to protect accounts that exceed this limit. 

The depository bond itself not only provides protection against loss of funds, it also helps guarantee their accessibility and availability for withdrawal. 

Who Does a Bank Depository Bond Protect?

While insurance generally protects the person who acquires it (the principal), in the case of a bank depository surety bond, the bond protects the obligee (the depositor). This can be an individual, trust, business or government entity who has deposited funds into the bank. The surety who issues the bond is the one to provide financial recompense should the principal (the bank) fail to perform its legal obligation to the obligee (the depositor). 

How to Obtain a Bank Depository Bond

Obtaining a bank depository bond is the responsibility of the bank that is holding the funds for a depositor, not the responsibility of the depositor themself. Why would a bank want this type of surety protection? Bank depository bonds allow them to attract and retain high value customers with large sums of money to deposit. It also allows them to comply with certain state and federal regulations. 

To obtain a bank depository bond, it’s essential to work with a surety agency who can help your business navigate the process. At The Patrick J. Thomas Agency, we help you obtain the bond and protection you need without the hassle. To get started on the process, get in touch with one of our surety experts today. 

Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.