DEFINITION of 'Warehouse Bond '

A type of financial protection that assures an individual or business keeping goods in a storage facility that any losses will be covered if the facility fails to meet the terms of its contract. If the warehouse owner or operator fails to meet its obligations, a third party company called a surety will act as an intermediary and compensate the client for his or her loss.

BREAKING DOWN 'Warehouse Bond '

State governments often require warehousers to be bonded. They also establish financial requirements for bonding. For example, the state of Massachusetts requires all public warehousemen to be licensed and bonded, and the bond requirement is $10,000 per warehouse. Bond requirements can vary depending on the type of warehouse (e.g., grain warehouse, eviction warehouse, public warehouse).

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