Bonded Insurance vs Errors & Omissions Insurance

Notary Bond Insurance

What is Notary Bond Insurance?

Let’s talk about Notary Bond Insurance. A notary bond is a financial guarantee that a Notary purchases from a surety company (essentially a third-party agreement). The surety company guarantees that you will perform your notary duties in accordance with the law. If you don’t, the company will pay the financially injured person any damages up to the bond amount. In some cases, however, they could come after you to recover those costs.

Bond insurance ensures that a notary will fulfill obligations to protect the public from financial harm resulting from a notary error made during a notary transaction. There are quite a few states that require a Notary to buy notary bond insurance. Bond limits are set by each state individually. So, look into your state laws to make sure you’re covered.

Choosing the Right Amount of Bond Insurance for your Business

Each state statute determines the cost and amount of notary bond insurance, and the cost of the premium is a fraction of the face-value bond amount. There are a couple of factors that determine your insurance, including your credit score and state laws.

What is Errors and Omissions Insurance?

When you’re looking into insurance, you’ll also see the option of Errors and Omissions insurance. This type of liability insurance will protect your company, your employees (if applicable), and other professionals from honest mistakes, negligent work, or inadequate work. It happens, and to ensure you’re covered, Errors and Omissions insurance is recommended for any business professional providing a service such as Notaries.

Error and Omissions insurance covers court costs and any other settlements up to the specified amount set by the insurance contract.  Without E&O, a notary can be held liable for millions of dollars for negligent damages plus the fees associated with the legal team, and you don’t want that.  E&O helps mitigate or eliminate potential liabilities. For example, a client can sue a notary for an error made unintentionally on a document that caused the client to be financially responsible.

Even if the court system ruled in favor of the notary in a litigation process, the legal and court fees associated with bringing a case to court could be very costly.  This is a situation where an E&O policy could work for the benefit of the notary. 

Keep in mind that E&O insurance may not cover temporary employees, claims stemming before the policy went into effect, or claims in different counties and states. These policies also do not cover criminal conduct or certain liabilities that may arise in civil courts.

Choosing the Right Amount of E&O Insurance for your Business

The cost of an Errors and Omissions policy depends on the type of business you run and the risk associated with your business.  You may consider substantial coverage if you are running a notary business and process taxes, give financial advice, etc.

It also will depend on your location and whether any previous claims have been paid out in the past. A business with numerous litigation problems will likely find E&O insurance more expensive.

An example of an E&O insurance policy in upstate NY provides a minimum coverage of 25K up to maximum coverage of 100K. Some signing companies require Notary Signing Agents to purchase at least a 50-100K policy when dealing with closing documents. 

A new notary starting as a part-time mobile notary may opt into a minimum coverage policy. Choose what works best for you and your business, and consider the type of service(s) you provide.

Where can you Purchase Notary Bond Insurance?

Many online insurance companies sell bond and E&O insurance; however, you might consider purchasing from the National Notary Association (NNA).  Once you choose the applicable state of commission, they will provide a selection of recommended premium options with costs.

As a Notary, you should consider carrying some type of insurance policy.  As notaries, errors happen and depending on how big of a mistake that was made, you may find yourself in a situation where you may need financial protection to cover honest mistakes. If you can’t afford a 100K policy, start with a 25K policy and then re-evaluate annually.  Or, consider purchasing an insurance package that has an effective period identical to your notary license effective period. 

For example, in the state of New York, notary renewals are processed every four years. It may be more financially practical and convenient to purchase a 4-year policy at a reduced rate because then you’re covered for some time and wouldn’t have to worry about it until it’s time for you to renew your notary license.

For more information on running a notary business, check out our article on The Importance of having a Notary Journal.