Florida Private Educational Institution 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 Florida private educational institution bond needs.
What Are Florida Private Educational Institution Bonds?
Florida private educational institution bonds provide financial protection for the state and for students/parents who have prepaid tuition and fees at certain private educational institutions. They obligate those institutions to operate in compliance with Florida statutes and the Florida K-20 Education Code. They also provide a way for parties incurring financial losses due to the noncompliant actions of a bonded educational institution to be compensated for those losses.
Who Needs Them?
Educational institutions participating in the Florida Tax Credit Scholarship Program are required by the Department of Education to purchase a private educational institution bond. The required bond amount is determined by the state on a case-by-case basis and must be equal to the average of all scholarship funds received for one academic quarter.
How Do They Work?
The school owner, referred to as the bond’s principal, is held legally responsible for monetary losses incurred as a result of a violation of the Florida statutes or the state’s Education Code. The Department of Education is the obligee requiring the bond. The third party to the bond is the surety guaranteeing the payment of claims by the principal.
Any infraction by the principal that causes financial harm to the state, a student, or parent, can trigger a claim by the injured party. For example, if a school closes its doors without delivering the educational services for which students or parents have prepaid tuition or fees, without issuing refunds, those students or parents may seek compensation by filing a claim against the private educational institution bond.
How Are Claims Paid?
Upon receipt of a claim, the surety will investigate it, and if it is valid, the principal is legally obligated to pay it. However, it’s standard practice for a surety to honor its guarantee of payment by paying a valid claim initially and then being repaid by the principal. The terms of the surety bond agreement indemnify the surety against any legal responsibility for paying claims and can take legal action against the principal, if not repaid, for claims paid on behalf of the principal.
How Much Do They Cost?
Two variables go into calculating the annual premium for a Florida private educational institution bond: the required bond amount established by the obligee and the premium rate assigned by the surety. That premium rate is the result of an underwriting assessment of the risk of the surety not being repaid for claims paid on the principal’s behalf. The main concern is that the surety won’t be repaid by the principal and may have to take legal action to recover the claim amount.
The underwriters lean heavily on the principal’s personal credit score in assessing the risk to the surety. A high credit score indicates a low risk to the surety and should result in a low premium rate. Conversely, a low credit score is a red flag for higher risk and warrants 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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