Notary Bond vs. Notary E&O Insurance: What's the Difference?
If you're becoming a notary public or renewing your notary commission, you've probably come across two important terms: notary surety bond and Notary Errors and Omissions (E&O) insurance.
Although these products are often discussed together, they serve very different purposes. A notary bond is generally designed to protect the public if a notary fails to fulfill certain legal obligations. Notary E&O insurance, on the other hand, is designed to help protect the notary against covered claims involving mistakes, negligence, or unintentional errors made while performing notarial duties.
Understanding the difference can help you meet your state's requirements and make better decisions about protecting your notary business.
In this guide, we'll explain what each product does, how they work, whether you need both, and what to consider when choosing coverage.
What Is a Notary Surety Bond?
A notary surety bond is a financial guarantee that helps protect the public against certain losses caused by a notary's failure to perform their duties according to applicable laws and regulations.
In states where a notary bond is required, the notary must generally obtain the bond before receiving or maintaining their notary commission.
A notary bond involves three parties:
Principal: The notary public who purchases the bond and agrees to follow applicable notary laws.
Obligee: The state or government entity requiring the bond.
Surety: The company that issues the bond and guarantees payment of covered valid claims, subject to the bond's terms.
How Does a Notary Bond Work?
If a notary commits an act covered by the bond that causes a qualifying loss, an injured party may be able to file a claim against the bond.
The surety company investigates the claim. If it determines that the claim is valid and covered, the surety may compensate the injured party up to the bond's available limit.
However, a notary bond is not traditional insurance for the notary.
If the surety pays a valid claim, the notary may be legally obligated under the bond agreement and indemnity agreement to reimburse the surety for the amount paid, along with applicable expenses.
The important takeaway: A notary bond is primarily designed to protect the public, not to pay for the notary's own legal defense or personal financial losses.
What Is Notary Errors and Omissions (E&O) Insurance?
Notary Errors and Omissions insurance is a type of professional liability coverage designed to help protect notaries against certain claims arising from mistakes or alleged negligence while performing notarial services.
Even experienced notaries can make mistakes. A missing signature, incorrect certificate, improper acknowledgment, or other error could lead to a financial loss and a claim against the notary.
Depending on the policy, E&O insurance may help cover:
Covered claims alleging negligence or professional mistakes.
Certain financial losses resulting from covered notarial errors.
Legal defense costs and attorney fees, subject to policy terms.
Settlements or judgments covered by the policy.
For example, imagine a notary unintentionally makes an error while completing a notarization. A person involved in the transaction later claims that the mistake caused financial damage and seeks compensation.
If the claim falls within the policy's coverage, the notary's E&O insurance may help pay covered defense expenses or damages, subject to the policy's limits, exclusions, deductible, and other conditions.
The important takeaway: Notary E&O insurance is designed to protect the notary against certain covered professional liability claims.
Notary Bond vs. Notary E&O Insurance: Key Differences
Although both products relate to a notary's professional responsibilities, their purposes are different.
Feature | ||
Primary purpose | Protects the public | Helps protect the notary |
Who is protected? | Eligible members of the public who suffer covered losses | The insured notary |
Required by law? | Required in certain states | Generally optional, but requirements can vary |
Covers mistakes? | Only qualifying acts covered by the bond | Certain covered professional errors and negligence |
Claims process | Surety investigates and may pay valid covered claims | Insurer handles covered claims under the policy |
Repayment responsibility | Notary may have to reimburse the surety | Covered losses are handled under policy terms |
Legal defense | Not designed to provide the notary's defense | May provide defense coverage, subject to policy terms |
The biggest difference is who each product is intended to protect.
A surety bond provides a financial guarantee for the public, while E&O insurance helps protect the notary from the financial consequences of covered professional liability claims.
Do Notaries Need Both a Bond and E&O Insurance?
In many situations, having both a notary bond and E&O insurance is a smart approach.
If your state requires a notary bond, you must satisfy that requirement to obtain or maintain your commission. E&O insurance may not be legally required, but it can provide an additional layer of financial protection.
Consider these two situations:
Scenario 1: A claim against your notary bond
A notary fails to comply with a legal requirement, resulting in a financial loss to an individual. If the conduct and loss are covered by the bond, the injured party may be able to seek compensation through a bond claim.
If the surety pays the claim, the notary may have to reimburse the surety.
Scenario 2: A professional negligence claim
A notary unintentionally makes an error while completing a notarization. Someone alleges that the mistake caused financial damage and files a claim against the notary.
If the claim is covered, the notary's E&O policy may help pay for legal defense and covered damages.
These examples demonstrate why the products are not interchangeable. Each serves a different purpose.
Is Notary E&O Insurance Required?
Notary E&O insurance is generally optional in many states. However, notaries should always check their state's current requirements and any additional requirements imposed by their employer, signing agency, or contracting organization.
Even when E&O insurance is not mandatory, it may be worth considering.
A notary's work involves verifying identities, administering oaths, witnessing signatures, and completing important legal documents. Mistakes can lead to disputes, financial losses, and legal expenses.
E&O insurance can help provide financial protection when a covered claim arises.
How Much Notary Bond Coverage Do You Need?
The required notary bond amount depends on the state where you are commissioned.
States establish their own notary bond requirements, including the required bond amount, term, and filing procedures.
For example, a state may require a notary to obtain a bond for a specific amount before the commission can be issued. That required amount is not necessarily the amount of E&O insurance a notary should purchase.
When considering E&O insurance, review the available coverage limits and choose an amount appropriate for your notarial activities and potential exposure.
Remember that a bond amount and an E&O policy limit are not the same thing. They serve different purposes and should be evaluated separately.
How Much Does a Notary Bond Cost?
The cost of a notary bond depends on the state, required bond amount, bond term, and surety provider.
In many cases, notary bonds are relatively affordable, especially compared with the financial consequences that can result from failing to meet a state's bonding requirement.
E&O insurance pricing is different. Its cost may depend on:
The coverage limit selected.
The policy term.
The insurer and available coverage options.
The notary's professional activities.
Other underwriting factors.
When comparing prices, don't assume that a lower bond premium and a lower E&O premium provide the same type of protection. They are separate products.
What Should You Look for When Purchasing Notary E&O Insurance?
If you're considering E&O insurance, take time to understand what the policy actually covers.
Here are several important things to review:
1. Coverage limits
Understand the maximum amount the insurer may pay for a covered claim. Also check whether the policy has separate per-claim and aggregate limits.
2. Legal defense coverage
Determine whether attorney fees and defense expenses are included within the policy limit or provided in addition to it.
3. Policy exclusions
Review what the policy does not cover. Certain intentional acts, criminal conduct, and other excluded activities may not qualify for coverage.
4. Deductibles
Find out whether you are responsible for paying a deductible before coverage applies.
5. Claims-made or occurrence coverage
Understand how the policy responds to claims based on when the alleged error occurred and when the claim is reported. If you change insurers or stop practicing, ask whether any extended reporting coverage may be necessary.
6. Covered notarial activities
Make sure the policy addresses the services you actually perform, including any specialized work such as mobile notarizations or loan signing activities, if applicable.
Can You Purchase a Notary Bond and E&O Insurance Together?
Yes. Some providers offer notary bond and E&O insurance options together, making it easier to address both your state bonding requirement and your professional liability protection.
Purchasing both can help simplify the process, but remember to review each product separately.
Before purchasing, confirm that:
The bond is issued for the correct commission term.
Your E&O policy provides an appropriate coverage limit.
You understand the exclusions and conditions of both products.
Frequently Asked Questions About Notary Bonds and E&O Insurance
1. Is a notary bond the same as E&O insurance?
No. A notary bond is a surety guarantee primarily intended to protect the public against certain covered losses caused by a notary's failure to fulfill legal obligations. E&O insurance helps protect the notary against covered professional liability claims.
2. Does a notary bond protect the notary?
A notary bond is primarily designed to protect the public, not the notary. If the surety pays a valid claim, the notary may be required to reimburse the surety under the bond and indemnity agreements.
3. Does E&O insurance replace a notary bond?
No. If your state requires a notary bond, purchasing E&O insurance does not satisfy that bonding requirement. They are separate products.
4. Is notary E&O insurance mandatory?
E&O insurance is generally optional in many states, but requirements can vary. Check your state's notary regulations and any additional requirements that apply to your work.
5. What happens if someone files a claim against my notary bond?
The surety company investigates the claim to determine whether it is valid and covered by the bond. If the surety pays the claim, you may be responsible for reimbursing the surety, depending on the applicable agreements and law.
6. What does notary E&O insurance cover?
Depending on the policy, it may cover certain claims involving professional negligence, mistakes, or errors made while performing notarial services. Coverage is subject to policy limits, exclusions, and conditions.
7. Should I purchase both a notary bond and E&O insurance?
If your state requires a bond, you must obtain one to satisfy the requirement. Purchasing E&O insurance as additional protection may also be a good decision, even if it is not mandatory.
Get Your Notary Bond and Insurance Through QuickerBonds
Whether you're applying for your first notary commission or renewing an existing one, understanding your bonding and insurance requirements is an important part of protecting your professional future.
At All American Bonds & Insurance (QuickerBonds), we help individuals and businesses find surety bond solutions for their needs.
We can help you understand your notary bond requirements and explore available bonding options.
Ready to get started?
Visit QuickerBonds.com or call 844-321-2663 to speak with our team.
Let QuickerBonds help you find the right bonding solution.
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