Why Get a Subdivision Bond

In construction the number one rule is to control the costs. The budget is the most important part of any construction projects. Projects that can be completed on time and under budget usually have the best chance at success. There are many things that can quickly derail the budget. It is important that the right decisions are made about how money is to be spent if a project is going to succeed.

One of the things that will often be necessary is the purchase of different surety bonds. Surety bonds guarantee payment for parts of the project if the money for the project runs out. One of the bonds that need to be considered is a subdivision bond.

What is it?

A subdivision bond is often called by other names. These names include completion bond, performance bond, plat bond and site improvement bond. One of the things that set the subdivision bond from the rest is who is responsible for paying for the bond. The bond can be used to guarantee the owner of a property or the developer of the property. It is normally paid for by the developer of the property.

Subdivision bonds are used by developers to make sure they complete all of the improvements that re promise in a development. There are many developments that have run out of money before they were finished. This unfinished work can cause the value of any completed work to go down. Houses built in a development are planned out. The roads needed for the development and the services that will be provided are all a part of the value of the homes in the development. This bond will help ensure that the properties are worth what they are supposed to be worth.

What to expect from a subdivision bond

It is important to know how the subdivision bond works. It is similar getting a loan. The issuer of the bond will check the credit of the individual who is applying for the bond. Anyone with bad credit will have difficulty obtaining a subdivision bond. The credit score of the individual or business applying for the loan will also impact how much the bond will cost.

The cost of the bond is based on a percentage of the bond amount on an annual basis. The fees on the bond will go down every year as the project is completed. It is important for the developers to obtain letters of clearance as the different parts of the subdivision are completed.

A claim will be filed against the bond if the developer fails to meet the required improvements or additions that they promised in a project. The individual that is harmed by these unfinished portions will be able to file a claim against the developer. The developer will be required to repay any money that is paid by the bondholder.

Subdivision bond or line of credit?

Some developers will wonder if they would be better off turning to a line of credit instead of getting a subdivision bond. There are a few reasons that make the subdivision bond a better choice than a line of credit.

  • Upfront costs – The bond requires a percentage of the total amount needed for a contract to be paid up front. The line of credit means that the developer will have to insure the entire amount of a contract with the line of credit. The costs for doing this are much higher.
  • The issuer of the bond will have a team in place to help prevent any false claims. The line of credit does not offer his type of service
  • The letter of credit can tie up funds – When you have a line of credit and have to use it to guarantee that the work will be completed, you are tying up cash that could be sued elsewhere. The biggest reason for failure of these projects is a lack of cash and the bonds can help prevent this from happening.

It should make sense to developers to get a subdivision bond. It is one expense that should be figured into the budget

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The Facts about an Executor Bond

The executors of estates have a difficult job. Making sure that the assets of an estate get to the right people is not always easy. Many people will fight to try to get more than they should. Others will argue about what everyone was supposed to get. The larger the estate, the bigger the problems can become.

It is up to the individual to decide who the executor of their estate will be. This decision is made before that individual dies. The person may be a lawyer or it may be a friend of the deceased. There are no rules about how the executor is supposed to be. The hope is the executor will handle the assets of the estate in a fair and ethical manner. Most executors will do this, but there will be some that will try to commit fraud or will mishandle the assets of the estate in some way. The problems that are created can be the result of an honest mistake or it could occur on purpose. Either way the people that are supposed to receive the assets of the estate are going to be harmed. It is a good idea to protect the estate by making sure that the executor of the estate has an executor bond in place before they make any decisions about the assets.

What is it?

An executor bond is a type of surety bond. It guarantees the assets of an estate will be handled properly. The executor bond is used to make sure that the executor does their job as required by law. If the executor fails to do the things they are supposed to do, the people that are harmed by the actions can collect a claim on the bond.

Although an executor bond is similar to an insurance policy, there are some differences. An insurance policy collects regular premiums. It pays claims that are legitimate when they are filed. The bond collects a fee that is based on a percentage of the amount of the bond. If a claim is filed, it will be paid, but the owner of the bond will be responsible for any money that is paid out.

Are executor bonds required?

Executor bonds may or may not be required. There are some states that require an executor to have a bond before they perform their duties, but not every state requires this. It is also possible to get a waiver that allows an executor to avoid having to get a bond. Many courts will also require an executor to get a bond before they do anything for an estate.

In the end, it often depends on who the executor of an estate is. Family members that handle the assets of an estate may not need this bond. When an executor has no relationship with the deceased, it may be a very good idea for the heirs to make sure they have the bond in place.

Where to get executor bonds

Executor bonds can be obtained from companies that sell other types of surety bonds. They will require an individual who is purchasing the bond to fill out an application and to undergo a credit check.

Dealing with the death of a family member is not easy. It is a time when people make decisions based on emotions instead of thinking clearly about what they are doing. It is very easy to trust an executor to do their job and to do it fairly and ethically. If the executor has an executor bond in place, they are more likely to follow through on their responsibilities. If they do not do that, the heirs of the  estate are protected and will get what they are due.

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Telemarketing Bond

A telemarketing bond is a specialized and very specific type of surety bond. It is required by most state government agencies in order to assure proper and successful transactions between the telemarketing company and its clients. This type of bonds will require telemarketing companies or telemarketing businesses to carry out their services in full compliance to the state and federal laws that regulate any commercial transaction.  The detailed conditions and expectations required by a telemarketing bond will change slightly according to the specific legal language in which the bond is underwritten, but most of them oblige the telemarketing company or business to offer and provide a clean service during the whole transaction process, from telephone calls to in-time delivery of the sold product. As with any other surety bond, a telemarketing bond is a contract where there are three main parties involved.

The principal is the telemarketing company or business that will have to purchase the bond. This principal purchases the bond claiming to have the ability to always work under the regulations or the exact laws that control the business. The bond plays as a financial guarantee that will control the principal’s transactions.

The second party involved is the obligee, which in most cases is a federal or state government agency. Most government entities require that any telemarketing-driven company or business purchase a bond before applying for or renewing a license. This is done to protect consumers from any possible financial loss during the transaction with the principal.

Finally, the third party is called the surety, which most of the time is represented by an insurance company. The surety is the party who will sell, underwrite and issue the bond. It is also the party that will assure to the obligee that the principal will fulfill and compete with all the laws involved. If the principal fails to compete with any of the laws that regulate their transaction, the obligee can make a claim to the surety against the bond. The surety will study the situation to find if the claim is valid. In the event of a valid claim, the surety will pay the obligee for the claim and turn to the principal for a reimbursement plus involved legal fees.

Telemarketing bonds are different from other surety bond because the product or service the telemarketing company or business provides will directly affect the cost of the bond. This is because some businesses are riskier than other, according to the region in which the telemarketing company is operating. Some businesses have better chances to succeed than others, thus making them more reliable and less risky. A timeshare telemarketing business in California, for example, would be a risky business compared to the same service in most other states. If the business is riskier, the bonds will be more expensive.

Most surety bonds professionals assure that the average coverage price for a telemarketing bond ranges from $20,000 to $50,000, but it might go as low as $10,000 or as high as $100,000. It will depend on the product the telemarketing deals with, and the state in which it operates.

All this said, the question as to why is a telemarketing bond needed still needs some clarification. Firstly, there is a clear difference between and insurance and a surety bond. A surety bond is a contract between three parties, while insurance has only two parties involved: the insurance company and the insured. A surety bond is made to ensure proper business between a service provider and a consumer. It is a protection for the consumer and a way for a government entity to have some regulation over the industry represented by the telemarketing company. Adding a third party to the equation makes the telemarketing bond more reliable to achieve successful and clean transactions and full competence with provided laws and regulations.

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Tax Collector Bond

Bonds are indicators that a person such as a business owner has satisfied certain licensing requirements and demonstrated an ability to provide a surety bond which indicates financial security. These bonds are enforced by government agencies as a way of safeguarding consumers in the event that those businesses which handle customers’ funds engage in unlawful practice. By possessing these bonds consumers are assured that any loss of funds due to unlawful or negligent practice on the part of the business owner, will be recovered. With tax collector bonds the public is assured that the tax collectors will adhere to certain laws.

As with any surety bond, three parties are essentially linked together: the principal, obligee, and the surety. The principal is the tax collector who actually applied for the bond and who is responsible for covering any losses resulting from malpractice. The principal is required to comply with all laws and regulations agreed upon when entering into and accepting the bond. The obligee is the specific government agency which requires and enforces the bond. Finally, the surety is the company which issues the bond to the principal and provides a form of financial guarantee to the obligee. This guarantee is  that the principal will fulfill their adherence to the rules and reimburse funds lost due to the business’ mishandling.

Essentially what all of this means to the consumer is that working with a professional who holds a tax collector bond signals to the consumer that they are working with a professional who will perform their duties with honesty and integrity. Elected and hired tax officials who are bonded will carry out their duties – in particular the treatment of tax funds – as laid out by the law. Such bonds may also be used to cover local tax authorities, tax assessors or tax collectors. There are a myriad of occupation and role specific tax collector bonds given the various roles and responsibilities required. The roles of those working in various tax related fields exist on federal, state and municipal levels and the handling of these funds from citizens should, understandably, be under scrutiny. Each jurisdiction is responsible for overseeing the rules and regulations which govern those working in the tax industry. Many government agencies will require the amount of the bond to total the exact value of the amount of money the officials will be managing. Since these amounts can be quite enormous, there are some areas which will place a maximum value on the required bond which may otherwise make it difficult to attain. 

For taxpaying consumers, tax collector bonds provide peace of mind that their tax officials are held financially responsible if they unlawfully mismanage funds. Additionally, these bonds can ensure that the public tax dollars are appropriately allocated to help alleviate concerns of fraudulent actions.

Depending on the work related duties of an individual, more than one type of surety bond may be required. For example in some jurisdictions a tax collector bond would suffice when an individual is working in a collections capacity, but depending on the state’s laws if they also act as an assessor they may require an additional bond. Those working privately in the tax industry should consult their insurance agent to inquire about their experience with bonds and whether or not their agent can assist them. If not, tax professionals can find pertinent resources on the internet regarding applying for this type of surety bond. Those working in various levels of government or government run agencies should confirm that as employees they are protected under the government’s surety bond certificate. If not then they must follow procedures required to obtain such a bond.

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Surplus lines broker bonds

Surplus lines broker bonds are a special and unique type of surety bonds. A surplus line broker is a particular kind of insurance broker. When a customer or entity’s situation is too risky to be insured by any of the state’s registered insurers (insurance companies), the surplus line broker comes in. The job of the surplus line broker is to find a policy in an external (out of state) insurer that might satisfy the special requirements of the customer. Out of state insurers are not regulated by the standard state laws, and thus have broader internal guidelines and more flexibility in writing and pricing particular policies that will enable the special costumer to be insured. However, since the regional state laws do not regulate the insurer, they also do not protect it; this means that the state Guaranty Association does not cover any surplus line insurer. A state Guaranty Association is a state fund built from gathering and investing the annual premiums (fees) paid by licensed and regulated insurers within the state limits. This fund protects the customers if an insurer declares itself broke. This is the main reason behind the great importance of surplus lines broker bonds. This bond will protect the consumer from any unlawful action committed by the surplus lines broker.

Even if surplus lines insurers are not regulated by the state, most states have a list of certified surplus lines brokers and insurers that have proved to be trustful. If an insurance broker wishes to obtain a license to work with surplus lines insurances, the state requires a surplus lines broker bond to be purchased in order to assure adherence to the law.

As any other surety bond, the surplus lines broker bond is a contract between three parties. The first one is known as the Principal. This is the insurance broker that wishes to obtain or renew his license that enables him as a specialized surplus lines broker. When a broker purchases a bond, an agreement is made to act always within the bond and state regulations for the industry. This is made to protect the customer and it is a financial guarantee that every service or information the surplus line broker provides is honest and lawful.

The second party is the Obligee. Most of the time, the state’s Department of Insurance (or similar regulatory agency) plays the part of the obligee. This is the party that will require the purchase of a surplus line broker bond before issuing any permit for working with surplus lines insurers. An obligee is also protected by the bond for any financial loss that comes from the principal failure to act within the law and industry regulations limits.

The third and final party is the Surety. This is the party that sells, underwrites and issues the bond. It must be a financially strong business, and thus most of the time an insurance company is the main provider of a surety bond. As the issuer of the bond, the surety has the obligation to investigate whenever there is a claim against the bond. In the event of a valid claim, the surety will pay the obligee any amount for damages that result from the unlawful behavior of the principal. The surety will seek reimbursement with the principal for all the fees paid plus any other legal fees incurred during the investigation.

Surplus lines broker bonds are of essential importance to any surplus lines insurance costumer. They represent one of their main protections against fraudulent transactions, misguided information, ethically dubious actions or unlawful behavior. Surplus lines insurance is a business that is not as regulated as any other insurance company, and thus the customer must seek other ways of protecting his investment. A surplus lines broker bond will enable the insurance broker to provide an honest and lawful service; it promotes the industry’s credibility and helps create successful transactions and good business relationships between surplus lines brokers and customers.

 

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Small Loan License Bond

Throughout the United States there are tons of payday loan advancement businesses claiming to provide quick access to income for those who can’t wait until payday to receive their funds. These businesses generally operate by charging flat fees or interest on the funds you are receiving. For example, your actual payday cheque may be for $500.00, but in order to access the funds earlier it will probably cost you more than what you would have received by waiting. A significant part of consumer debt has been blamed on these types of businesses which essentially create a larger debt hole for consumers to dig out from.

Also called payday loan bonds, a small loan license bond isn’t necessarily required in order to operate a cheque advancement company. This type of business is monitored differently depending on the state it operates in so consumers and business owners alike should contact their state regulator to learn about their state’s requirements. If you reside in a state where these businesses are not required to be bonded, remember that it doesn’t mean that all payday loan operations don’t have a surety bond. An educated consumer should do their research and will perhaps be able to find one such business who is in fact bonded.

With a relatively low cost to the businesses who can expect to pay between 1-5% of the bond value, this is a rather small price to pay to demonstrate integrity to their customers. A lending company whose employee neglects to fulfill an agreed upon service with a client may cause a claim to be filed against the company who can be ordered to recover all costs to the consumer. A surety bond is assurance for the customer that if their funds are mistreated they will be able to recoup their losses. Additionally, this bond prevents the lender from charging excessive fees or interest rates.  This is one of the main reasons why consumers seeking loan advancements should only enter into a relationship with a loan company who carries the appropriate bonds.

Companies who are either required by their state’s laws to be bonded, or who seek to provide some peace of mind to their consumers should begin the process by contacting their local state department and requesting a list of the exact requirements to obtaining a license to operate a loan business. In these requirements it should indicate whether or not a small loan license bond is needed. The business owner will be required to fill out forms and provide information on the assets, liabilities and capital of the company, the type of business activity it will be conducting, the proposed methods of funding, and their business registration. Other information may be required as well since each state sets its own parameters.

When a business applies for a small loan license bond, they are applying to an insurance company to be bonded, or covered in the event they cannot cover any claims they are ordered to reimburse. Therefore, depending on the business and owners credit rating they may or may not qualify for bond coverage. Consumers should therefore only seek out the services of a company which is bonded regardless of whether or not the state’s laws require the business to hold a bond. If the owner’s financial situation or that of the company itself results in them having a poor credit rating, then the amount they may need to pay to be bonded will likely be higher. The difficulty is for those seeking money advancements to refrain from dealing with less qualified companies and instead take the time to safeguard themselves by researching the laws in their state and inquiring as to whether or not the business hold a small loan license bond.

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Preneed Funeral Bond

There aren’t many things in life that we have complete control over. Sometimes we are fortunate and the result is favorable, and other times we end up disappointed with the final outcome. When it comes to taking care of things in our absence many people turn to planning preneed funeral services. Whether they have certain religious or cultural needs to be met, or have a particular manner in which they would like the proceedings to run, the desire to preplan an inevitable event is very popular.

Choosing the final resting place is no easy task and is a very personal decision. Some choose to be buried side by side with loved ones, others may choose to be cremated and have a memorial plaque on the wall. Perhaps there’s a particular cemetery where your family rests or maybe you’d like a quiet chapel service or a large catered reception. Many funeral homes and parlors offer countless options as do burial sites and crematoriums. The challenge in ensuring your wishes are fulfilled is that preplanning may be required.

For many people, taking care of their final resting place is not only an opportunity to ensure their needs and wishes are met, but this can also seek to alleviate any burden on those left behind. A preneed funeral is often paid for in advance with minor adjustments to be negotiated, thereby decreasing any burden on dependents, friends and family members who may not be in a financial state to cover the costs of such an event. The difficulty here becomes ensuring the desires are fulfilled to the client’s needs, however the client is unrepresented. Their interests are protected by a Preneed Funeral Bond, provided the funeral parlor is bonded.

The advantage of a Preneed Funeral Bond is that those carrying out the wishes that were paid for are held accountable to ensure plans are followed as requested. When a company purchases this type of bond they become the bond’s principal promising to the state, the bonds obligee, that the specifications prescribed in writing will be carried out. The promised is essentially backed up by the surety in the form of the actual bond itself.  Funeral homes can be held accountable for misuse of the customer’s funds and be ordered to reimburse the amount that was unlawfully used. Additionally, Preneed Funeral Bonds provide reassurance in the even the funeral home or parlor ceases to exist prior to holding a preneed funeral.

These types of bonds are relatively new, so in order for a funeral or burial service provider to receive a one, they would commence by contacting their insurance agent to inquire whether this type of surety bond was something their present insurance provider could assist them with. If not, then a search on the internet would provide the funeral home with other insurance companies in their area. When applying for the Preneed Funeral Bond, the owner of the funeral service company can expect to surrender to the insurance agent information such as the financial statements for the business as well as their personal financial statements, business licensing information, business and personal tax information, and anything else desired by the insurance company.

Consumers need be aware that a surety bond is not a form of insurance whereby the holder can make a claim and receive financial assistance. Instead, a surety bond demonstrates that the owner can and is obliged to, pay back any monetary loss due to the business’ unlawful use or representation of the clients funds. When preplanning for your future needs, ensure that you are working with a funeral or burial service provider who holds a Preneed Funeral Bond, signifying their commitment to taking care of your funds and your future needs.

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Patient Trust Bond

Patient Trust Bonds ensure that any patient’s funds mismanaged by a care facility are guaranteed to be reimbursed. These bonds may be held by those operating care facilities or by those providing in home care services. These bonds are also known as Medicare Bonds which are required by any health care service provider who bills Medicare for some or part of the services they provide to clients. One example is a Nursing Home Patient Trust Bond which safeguards those who reside at the nursing home itself. This is accomplished by ensuring that the funds kept by the nursing home on behalf of the patient are appropriately handled on their behalf. With this type of Patient Trust Bond, an approximation of the maximum amount of funds which can be safeguarded is two times the amount the patient has in trust, and the minimum is $5000. Keep in mind this varies from state to state so be sure to check the particulars as required by your state or that of your loved ones in care.

Care facilities can contact their insurance provider to begin the process of applying for this bond, so long as their agent is familiar with bonds. Alternatively, an internet search will produce numerous companies offering quotes for Patient Trust Bonds. The health care facility must provide detailed information and are subject to a credit check to identify any possible outstanding liens or debts. The bond signifies to the patients that the facility is able to cover, out of their own pocket, any fees resulting from their own negligence or unlawful treatment of the patient’s funds. A bond is in no way a cashable insurance policy, rather it provides peace of mind to patients and their families that the facility is adhering to rules and regulations and must follow a code of conduct.

Once the health care provider or facility has begun the process of applying for a Patient Trust Bond, they should be aware that the requirements differ for each surety policy depending not only on the state of the provider and their credit rating, but also that the requirements vary from company to company. This is because each company may be underwritten by a different underwriter with varying needs and specifications. For example, the facility may be asked to provide information on their businesses financial situation, including any previous audits. The experience and background of the owners and staff may be asked necessitating copies of relevant resumes to be forwarded for review. In addition to the business’ financial statements, the owners of the facility may be asked to show their personal financial statements, including bank account information and undergo a credit check. Those looking to attain bonds should also be prepared to provide relevant information such as their licenses and permits.

Many of the long term care facilities in the United Stated hold a Patient Trust Bond, which should provide some peace of mind especially for those who have loved ones in a facility in a different state then them. With these bonds if the patient finds themselves needing to make a claim because of unlawful use or treatment of their funds, the facility can be found responsible and ordered to reimburse the patient out of pocket. Finding a facility that is bonded means that they are required to abide by certain rules and regulations, and are subject to penalties if it is found that they have broken the bonds terms and conditions.

If you are searching for an appropriate care facility for a loved one begin by researching the requirements as laid out by the state your loved one will be residing in. Once you have armed yourself with these details you will be in an advantageous state to make an informed decision as to which facility will have your loved one’s best interests in mind. 

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Mortgage Broker Bond

If you’ve ever purchased a home or rental property, chances are you’ve had a mortgage. The process of applying for a mortgage can be time consuming and arduous, often making the applicant feel fully exposed. All financial information including income, debt, and savings are divulged to someone who has just become a quick acquaintance. This person has instant access to your entire financial worth. How do you know they will maintain confidentiality? Will you accept them at their word and risk being burned by a complete stranger? Well, the first thing to ask before continuing the relationship past hello, is whether or not they hold a Mortgage Broker Bond.

A Mortgage Broker Bond is issued to a broker who possesses good credit and signifies to the public that he will not take part in any misrepresentation, fraud or wrongfully withhold monetary deposits. This bond guarantees that the broker complies with state and local laws and that the broker will be subject to paying a fine for violating laws granted to them. The brokers must possess the financial resources to meet any obligation carried with the bond, since the purpose of a Mortgage Broker Bond is to recover any expenses, fines or levies incurred as a result of non-compliance. Additionally, any losses to customers of the broker or any borrowers, which are directly resulted to the unlawful practice of the broker, are covered by the bond as well. By covered, it is meant here that the broker personally has the funds to cover losses. This bond does not serve the function of an insurance document in that it itself will cover any losses, rather it assures that the broker named can afford to pay out of pocket.

In order to obtain a bond, a broker must contact their state department for a list of insurance companies that work in Mortgage Broker Bonds, unless the broker’s own insurance company can provide the required information. Additionally, there are a multitude of companies readily able to provide quotes to the online consumer.

A mortgage broker works on behalf of consumers to process, solicit, and place a request for a mortgage on behalf of their clients. Most states require that whether the broker carries out these tasks by phone, email, fax or in person, they must carry this type of bond.  As a consumer, be aware that these bonds are only mandatory in 45 states so if you reside in a state where they aren’t mandatory, ensure you have thoroughly researched your broker before business commences. This can mean taking extra care to review the broker before work commences as well as be careful to read all information, especially anything in small print. Be wary of low interest rate quotations well below industry norm. Carefully research the financial institutions brought forth to you by the broker to ensure the mortgage is from a reputable institution rather than an unnamed, unknown source. By signing documents with a broker who does not possess a surety bond, you are basing your rate of risk on their word.

Before working with a broker ask them if they are bonded and for how much. The amount required in each state varies depending on what the dollar value of the mortgages a broker works with is. Typically, the higher overall dollar value, the higher the amount required by a broker. If you find yourself with a broker who does not hold a Mortgage Broker Bond, then demonstrate your aptitude as a consumer and inquire as to why they aren’t bonded, and more importantly, how they intend to have you as a client when they clearly are not concerned about protecting themselves or their clients.

 

 

 

 

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Money transmitter bond

A money transmitter bond is a special type of surety bond that is required for any business that wishes to start working within the money transmitter industry. A money transmitter is an entity that provides money transfers or payment services throughout the United States. Clear examples of this type of companies are Western Union or Paypal. As with many other industries, a money transmitter is a licensed business. It requires a special license in order to operate. These licenses are mostly issued by state government agencies. In order to obtain a license for money transmitting, the owner of the company should complete a series of prerequisites that qualify the business as adhered to the law. One of these steps is the purchase of a money transmitter bond. The main objective of a money transmitter bond is to assure that the money transmitter business will provide its services in full accordance to the laws and to the specific regulations of the industry. It is a way to protect the customer from any possible fraudulent or unlawful behavior.

As with every other surety bond, the money transmitter bond is a legally enforceable contract between three parties. The first party is known as the Principal. The principal is the individual or entity that will require a money transmitter bond in order to operate a money transmitter business. When purchasing a surety bond of this kind, the principal is agreeing to act adhered to the laws and regulations of the industry. It is a financial guarantee where it is stated that the client will not be a victim of unlawful or ethically dubious services.

The second party is known as the Obligee. Most of the time, state governmental entities play the role of the obligee. The obligee is the party that solicits or requires the bond before issuing a license or permit. Since the government agency that issues the specialized license change from state to state, the exact conditions and expectations of money transmitter bond will be different in one state than another. With the money transmitter bond, the obligee is also protected against any financial loss due to unlawful behavior from the principal.

The third and final party is the Surety. This is the party that sells, underwrites and issues the bond. Sureties need to be financially strong businesses and thus are mostly represented by insurance companies. As the issuer of the bond, the surety has certain specific obligations towards the principal and the obligee. The surety will be the party to act when there is a claim against the bond. When the principal acts in unlawful or ethically dubious manner, the obligee has the right to make a claim against the bond. The surety has the obligation to investigate the situation and determine if the claim is valid. In the event of a valid claim, the surety will pay the obligee for any harm or damage incurred due to the unlawful behavior of the principal. The surety will then charge the principal for a reimbursement of that payment plus any legal fees that came out of the surety’s investigation of the case.

As one might have figured out, a money transmitter bond does not act as insurance for the principal, but for the obligee and the customer. Insurance and money transmitter bond, however, is not the same thing and they should not be confused. Insurance is a contract between two parties (insurance company and insured entity), where no reimbursement is included. Money transmitter bonds are contracts between three parties where reimbursement is necessary in the given case the bond is violated.

The inclusion of money transmitter bonds as a prerequisite to obtain a professional business license is a great and efficient way to regularize the industry. It is the state government entity that follows these regulations and makes sure that every business is acting in full accordance to the laws involving the business and its services. Money transmitter bonds and surety bonds in general are a great way to protect customers from any financial loss due to unhealthy behavior from a business.

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