Montana Proprietary School Bond

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Montana Proprietary 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 Montana Proprietary School bond needs.

What Are Montana Proprietary School Bonds?

Montana proprietary school bonds are purchased voluntarily by proprietary school owners as a guarantee that students will receive the educational services their tuition entitles them to.

Who Needs Them?

Montana has no licensing or bonding requirements for proprietary schools. However, some proprietary school owners choose to purchase a surety bond as assurance students will receive the educational services promised in the student contract in exchange for tuition paid to the school. The school owner chooses the bond amount desired, but it should be enough to refund tuition prepaid by currently enrolled students if that becomes necessary.

A Montana proprietary school bond can provide a competitive advantage over unbonded schools because of the financial protection it provides against the loss of prepaid tuition and fees.

How Do They Work?

A Montana proprietary school bond forms a legally binding contract between the school owner purchasing it (known as the “principal”) and the bond’s guarantor (the “surety”). 

If the principal doesn’t live up to the school’s contractual obligations, causing financial harm to a student, and does not issue a refund, the injured party can file a claim for damages against the bond. This is particularly important protection for students in the event the school closes its doors before they have completed the course(s) they have paid for. 

The surety looks into each claim to ensure that it is legitimate before approving it for payment.

How Are Claims Paid?

The terms of a Montana proprietary school bond legally obligate the principal to pay all valid claims. However, as the guarantor, the surety typically will pay a valid claim up front to settle the matter quickly. But that payment to the claimant does not eliminate the principal’s obligation; it simply transforms it into an obligation to repay the surety. If not repaid, the surety can take the principal to court to recover the funds.

How Much Do They Cost?

The annual premium for a Montana proprietary school bond is the product of multiplying two factors—the face amount of the bond and the premium rate set by the surety. The premium rate depends on how risky the underwriters believe it is for the surety to pay claims on the principal’s behalf. 

The principal’s personal credit score is the primary measure of risk, with a high credit score indicating a low risk level and a low credit score taken as a sign of higher risk. The lower the risk, the lower the premium rate and vice versa.

The average well-qualified principal will pay a premium rate that’s in the range of one to three percent.

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Our surety bond professionals will get you the Montana proprietary school bond you need at a competitive rate.