Delaware Private Business and Trade School Bond
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Delaware Private Business and Trade School bond needs.
What Are Delaware Private Business and Trade School Bonds?
Delaware private business and trade school bonds are surety bonds that provide financial protection for students and their parents, who have prepaid tuition and fees at a private business or career institution providing post-secondary education and training. These bonds ensure students who did not receive all prepaid educational services–because the school closed or otherwise failed to deliver as promised–are compensated for monetary damages if the school does not voluntarily refund their money.
Who Needs Them?
Any private business or occupational school applying for a certificate to operate in the state of Delaware is required by the Delaware Department of Education to provide a surety bond for the protection of students and their parents. This is a mandatory step in the licensing process. The Department of Education (the “obligee” requiring the bond) establishes the required bond amount based on an institution’s gross revenue from tuition.
How Do They Work?
The terms of a Delaware private business and trade school bond obligate a school’s owner (the bond’s principal”) to operate in compliance with all applicable state laws and Department of Education rules and regulations. Specifically, they obligate the principal to deliver all educational services for which tuition and fees have been paid and have not been refunded.
The surety bond terms also obligate the principal to pay all valid claims against the bond. The bond’s guarantor (known as the “surety”) guarantees the payment of valid claims, but the legal obligation for them belongs entirely to the principal.
How Are Claims Paid?
Because the surety has guaranteed the payment of claims, it’s common practice for the surety to pay a claim on behalf of the principal once the surety has investigated and found it to be valid. But that payment is not a gift to the principal; it’s a loan and must be repaid by the principal. The surety is indemnified against any legal responsibility for claims and can take legal action against the principal if that’s what it takes to collect on the debt created by paying a claim on the principal’s behalf.
How Much Do They Cost?
Delaware private business and trade school bonds are sold for an annual premium that is a small percentage of the required bond amount. That percentage is the premium rate, which is set by the surety through an underwriting process. The main underwriting concern is the possibility the surety may not be repaid for the amount paid out on a claim. That risk is measured by the principal’s personal credit score.
A good credit score is a sign of financial responsibility, making the surety’s risk of not being repaid low. Low risk results in a low premium rate. The opposite is also true. A low credit score is a sign of higher risk, which results in a higher premium rate.
The average well-qualified principal will pay a premium rate that’s in the range of one to three percent.
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