For over 4 Million Notaries in America, their seals and stamps are a solemn tool to be used with great integrity (National Notary Association, 2018). Notaries are generally viewed as trustworthy individuals handling the most important documents with the entire purpose to serve as an impartial witness.
On any given day a Notary Public may validate the most vital records including mortgages, deeds, wills, and power of attorney. However, in the course of a Notaries’ work, it is certainly possible a mistake could be made on any of these formal papers.
If you were making a mistake in your Notary role, how do you plan to correct the mistake and make the customer whole again? Do you want to protect yourself from unwanted -legal expenses and lawsuits?
Both Notary Bonds and Errors & Omissions insurance offer ways for Notaries, like yourself, to correct mistakes you may accidentally made. To figure out what will work best for you, it’s important to get informed about the basics. Read more to learn about Notary Bonds versus Notary Errors & Omissions (E&O) Insurance.
What is a Notary Bond?
A Notary Surety Bond is underwritten by a Surety Bond Company or Insurance Company and covers the Notary’s clients. The Notary Bond is essentially like a line of credit. The Notary’s customer may file a claim against the Notary Bond if he/she was harmed by an unintentional mistake made by the Notary. The Surety Bond Company will pay the customer the maximum amount requested and allowed under the Bond terms.
As you can see, the Notary Surety Bond is intended to protect the client – not the Notary. Typically, the Notary’s licensing authority (usually the Secretary of State) will keep a copy of the Surety Bond on file. This is to assure the public that the Notary Public is a professional with the proper licensing and is committed to doing his/her best work.
How Do You Get a Notary Surety Bond?
The first step is to find a reputable, state licensed Surety Bond Agency (or Insurance Company) that can assist you with a Notary Surety Bond which will require you to complete a simple application.
Depending on the state requirements, the Surety Company may only ask for the Notary Public’s name, address, and telephone number. In other states, Surety Companies will require additional details including (but not limited to) the following:
- Type of Bond
- Bond Amount Needed
- Bond Effective Date
- Business Information (i.e. address, year business started, Tax ID)
- Obligee Name and Address (this is the Government agency or other party requiring bonding)
- Notary’s Social Security Number
- Notary’s Marital Status (If married, provide details about spouse)
- If you own your home, you will answer questions about your mortgage amount, pay-off date, years owned, etc.
- Number of years Notary experience
Notary Surety Bonds last for the same amount of time as your Notary commission. For example, in the State of Illinois, Notaries are commissioned to carry out their duties for a four-year time period. Therefore, your Surety Bond will also be valid for the same four years as your Notary commission.
Cost of Surety Bonds
Each state requires a Notary to secure a Notary Surety Bond for a set amount with the face value stipulated varying from state to state. In general, Notary Surety Bonds can cost anywhere from $5,000 to $15,000, depending on the length of time the bond will last.
The price for a Notary Surety Bond is a small fee in comparison to the Bond’s actual value. Typically, the Notary will pay $50 to $100 for the bond, depending on the surety agency.
Keep in mind, once a Notary Bond is cashed out you will have to reimburse the surety organization. In addition, the Notary Surety Bond is voided after it has been used. So, if you make use of your Notary Surety Bond, then you will have to obtain a replacement bond. You will not be allowed to work as a Notary Public until that new bond is in place.
Notary Errors and Omissions (E&O) Insurance
Notary Errors and Omissions (E&O) is a type of Professional Liability insurance for Notary Publics. Many professions require E&O Insurance because any small blunder has the potential to cause a customer serious financial consequence. For this reason, Professional Liability (E&O) Insurance is needed to safeguard the professional. Even false accusations of wrongdoing can become expensive as you pay for an attorney and court costs while fighting the allegations.
Examples of when Notary E&O Insurance can be used:
- Unintentionally violating the law while notarizing
- Notarization error or omission causing the public harm
- Unfairly named in a lawsuit
- Your signature or commission information being forged on documents by an unauthorized party or imposter
Notary E&O Insurance protects the Notary Public from any customer claims resulting from the Notary’s unintentional professional mistake. An E&O Policy offers coverage up to the policy’s limit. If a Notary does not have an E&O Policy in place then they will be personally responsible for damages they caused while acting as a Notary.
For example, if the Notary Public does not have E&O Insurance, he/she will have to use their personal assets to settle the client’s claim. If the Notary Public does not have sufficient funds available then he/she should expect wage and income tax return garnishments, as well as liens on personal property like their home. One way or the other, the Notary will be required to pay-back their wronged customer.
Remember, E&O Insurance will pay for an attorney with expertise in Notary law. E&O Insurance can be used for the legal fees, court costs, and claim itself—up to the policy limits. There is no repayment of losses (like a Surety Bond).
How Do You Get E&O Insurance?
You can purchase Notary E&O Insurance from most insurance carriers offering commercial insurance policies like Worker’s Compensation and General Liability. You will need to complete an E&O Insurance application for the policy.
The E&O Insurance application will ask various questions including:
- Have you had a previous E&O claim or lawsuit?
- Whether you are aware of any circumstances that may result in a claim?
- Details about your clients and your processes.
It is to your advantage to show the underwriter how cautious you are in your Notary role. The more carefully you approach your Notary responsibilities then the less likely you are to have an E&O claim. This makes you even more appealing as a potential insured.
How much Notary E&O Insurance Is Needed?
Many Notary Publics will buy E&O Insurance in a standard $25,000 face amount. However, it is really up to you as to what amount is best. Usually it is a good idea to buy an E&O Insurance plan that will cover the amount of your Surety Bond, as well as any additional claims expenses that may arise.
Cost of Notary E&O Insurance
The cost of a Notary E&O Insurance policy can vary depending on various factors such as the face amount and the policy length. However the
What Is the Difference Between Notary Surety Bond and E&O Insurance?
As we touched on earlier, there are compelling differences between a Notary Surety Bond and Notary E&O Insurance. The main points to remember are Surety Bonds are usually required by the State while Notary E&O Insurance is elective. Notary Surety Bonds protect the public but Notary E&O insurance protects the Notary.
If your Surety Bond is paid out then you will have to reimburse the Surety Agency, as well as buy a replacement bond, However, E&O Insurance does not work the same. For an E&O policy, you simply pay the premium due and the insurance carrier will cover all the other expenses generated by the claim. There is no repayment of losses, and you do not have to buy another policy to replace the initial E&O coverage.
The bottom line is you can never have enough protection for yourself and your customers. Notary Public duties are critical to authenticating the most critical records in American society, such as mortgages, deeds, and wills. In such a crucial role, an unintended error can be devastating to you and your client. So, you can see, there will never be enough protection and assurances for all parties involved. Purchasing both a Notary Surety Bond and Notary E&O Insurance is the perfect combination of security. The good news is neither of these safeguards will break your budget.