Michigan Title Bonds

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What Are Michigan Title Bonds?

If you want to insure, register, sell, or otherwise transfer ownership of a vehicle for which you don’t have a valid certificate of tile, you’ll need to obtain a bonded title. A bonded title will allow you to do anything you could do with a standard title, but it provides certain protections if it later turns out that you should not have been issued a bonded title.

Specifically, during the three years that it is in force, a Michigan title bond:

• Indemnifies the Michigan Department of State and the Vehicle Title Division for issuing a bonded title
• Provides a source of funds for compensating any prior owner or subsequent purchaser who experiences a financial loss due to the issuance of a bonded title

While the focus here is on motor vehicles, bonded titles can also be obtained for watercraft, snowmobiles, and manufactured homes, although some of the details may differ.

Who Needs Them?

You’ll need to purchase a Michigan title bond and obtain a bonded title for a vehicle you purchased if you:

• Did not receive a title certificate when you purchased the vehicle
• Received a title certificate that was improperly assigned, altered, damaged, or considered invalid for some other reason
• Received a title from the seller but it was lost or stolen before you were able to register the vehicle in your name

The required bond amount (the bond’s “penal sum”) must be twice the vehicle’s current value. ​You can use the current market value from a licensed Michigan motor vehicle dealer, the Secretary of State’s office, or an accepted source such as the NADA Guide, Kelly Blue Book, or Edmunds.

The bond must have a three-year term and remain in force for the entire three years.

How Do They Work?

There are three parties to a Michigan title bond agreement, which is a legally binding contract:

• The obligee (the party requiring the bond) is the Michigan Department of State, Vehicle Title Division.
• The principal (the party required to purchase the bond) is the person applying for a bonded title.
• The surety (the party issuing the bond) is the Michigan-licensed surety bond company.

At any point during the three-year term of a Michigan title bond, a prior owner or lienholder could come forward with proof of ownership and file a claim against the bond.

The surety bond agreement establishes the legal obligation of the principal to pay all valid claims. It indemnifies the obligee and the surety against any responsibility for doing so. However, it’s typically the surety who makes payment to the claimant on behalf of the principal, which creates a debt that the principal must repay to the surety.

What Do They Cost?

Bonds with a penal sum of $6,000 or less are not subject to underwriting and are sold for a flat fee of $100. For bonds with penal sums between $6,001 and $25,000, an extra $15 is added for every additional $1,000 in value. Only vehicles valued at more than $25,000 are subject to underwriting, and the premium rate is based largely on the principal’s credit score.

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