Tennessee Postsecondary Educational Institutions 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 Tennessee postsecondary educational institution bond needs.
What Are Tennessee Postsecondary Educational Institutions Bonds?
Tennessee postsecondary educational institutions bonds provide a way to compensate students, parents, or other sponsors who have experienced financial loss because of the school’s unethical business practices. The services that students are entitled to receive in exchange for their tuition payments are detailed in the student contract.
Violations of that contract that cause monetary damages can result in the injured party filing a claim against the school’s postsecondary educational institutions bond. Some of the more common violations include misrepresentation of the educational services to be delivered, failing to maintain student records, having an unfair cancellation and refund policy, and so on.
Who Needs Them?
The bonding requirement applies to all Tennessee postsecondary educational institutions, including out of state institutions that provide services to students residing in Tennessee. The required bond amount for in-state institutions is $10,000, while for out of state institutions, it's $20,000. Bonding is mandatory, required by the Tennessee Higher Education Commission (the obligee requiring the bond) as a condition for operating within the state.
The bond must be purchased in the name of the school’s owner (the bond’s principal). The bond must be maintained continuously unless canceled by the surety with 60 days written notice to the obligee.
How Do They Work?
The third party to the legally binding surety bond agreement is the surety guaranteeing payment of claims by the principal.
When a party financially injured by the actions of the principal files a claim for damages, the surety first investigates the claim to determine its legitimacy before approving it for payment.
How Are Claims Paid?
The terms of the surety bond agreement legally obligate the principal to pay all valid claims. However, the surety has guaranteed their payment. Consequently, rather than wait for the principal to remit payment to the claimant, the surety goes ahead and pays a valid claim initially on behalf of the principal.
The surety is indemnified against any legal responsibility for claims payments, so that payment to the claimant is in effect a loan to the principal. It creates a debt that the principal must subsequently repay to the surety. Failing to repay the debt can result in the surety taking legal action against the principal to recover the claim amount.
How Much Do They Cost?
To purchase a Tennessee postsecondary educational institutions bond you will pay an annual premium that is a small percentage of the required bond amount. Exactly how large that percentage, the premium rate, will be depends on an underwriting assessment of the risk the surety runs in paying claims on your behalf. The assessment leans heavily on the principal's personal credit score as a measure of risk. A high credit score is indicative of a low risk to the surety, so the premium rate assigned to that principal will be low as well. A principal with lesser credit is regarded as a higher risk of non- repayment and will pay 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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Our surety bond professionals will get you the Tennessee postsecondary educational institutions bond you need at a competitive rate.