Iowa Title Bonds

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What Are Iowa Title Bonds?

An Iowa title bond is the key to obtaining a bonded title for a vehicle lacking a proper certificate of title. With a bonded title, you can do whatever you could do with an original title, such as register the vehicle, insure it, or transfer ownership to someone else by selling, gifting, or donating it. After three years with no challenges to your ownership of the vehicle, the bonded title can be exchanged for a standard certificate of title.

An Iowa title bond serves these specific purposes:

• It indemnifies the Iowa Department of Transportation against liability for damages caused by issuing a bonded title without absolute proof of ownership.
• It provides a source of funds for compensating the vehicle’s true owner or lienholder, if one turns, up during the three years that the Iowa title bond is in force.
• It indemnifies any subsequent owner that purchases the vehicle against financial loss if a legitimate prior owner or lienholder surfaces during the time that the Iowa title bond is in force.

Who Needs Them?

You’ll need a bonded title if:

• You purchased a vehicle and did not receive a title from the seller
• You received an improperly assigned or otherwise defective title
• The title the seller gave you was lost or stolen before you could register the vehicle in your name.

Anyone applying for a bonded vehicle title in the state of Iowa must purchase an Iowa title bond. This is the first step in the somewhat complicated bonded titling process.

After you submit an application to initiate the process, the Iowa DOT’s Office of Vehicle and Motor Carrier Services will determine the required amount (the “penal sum”) of your Iowa title bond based on the vehicle’s appraised value—1.5 times the appraised value, to be exact. Every Iowa title bond must have a term of three years.

How Do They Work?

The surety bond agreement for an Iowa title bond brings together three parties known as the “obligee,” the “principal,” and the “surety” in a legally binding contract:

• The obligee, the party requiring the bond, is the Iowa DOT.
• The principal, the party required to purchase the bond, is the person seeking a bonded title.
• The surety is the company issuing the Iowa title bond.

If a prior owner or lienholder can prove their ownership interest in the vehicle during the three-year term of an Iowa title bond, they can file a claim against the bond. The principal is legally obligated to pay the claim. However, the surety typically makes payment directly to the claimant and is then repaid by the principal.

What Do They Cost?

The premium cost for an Iowa title bond depends on the bond’s penal sum. Bonds for $25,000 or less are not subject to underwriting, and the premium is calculated as a flat amount that is the same for all bonds of the same amount. Bonds with a penal sum above $25,000 go through underwriting, and the premium is based primarily on the principal’s credit score.

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