Utah Proprietary Schools 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 Utah proprietary school bond needs.
What Are Utah Proprietary Schools Bonds?
In Utah, as in many states, proprietary schools are subject to mandatory bonding. A Utah proprietary schools bond helps ensure that a bonded school abides by all applicable state laws and the requirements of the Utah Postsecondary School Act. The intent is to provide financial protection for students who have paid tuition and fees in exchange for certain educational services, outlined in the student contract with the school.
One of the main concerns is the possibility that a proprietary school could cease operating before delivering the services to which students are entitled by their tuition payments. The bond provides a way to compensate those who have experienced financial harm because of the school’s unlawful or unethical business practices when the school has not refunded their tuition and fees.
Who Needs Them?
All proprietary schools operating within the state of Utah are required by the Utah Division of Consumer Protection, the bond’s obligee, as a condition of licensing. Utah defines a proprietary school as a private institution, including a business, modeling, paramedical, tax preparation, or trade or technical school that offers postsecondary education in consideration of the payment of tuition or fees and for the attainment of educational, professional, or vocational objectives.
A Utah proprietary school bond must be purchased in the name of the school's owner, known as the bond’s principal. The obligee determines the required amount of each bond on a case-by case basis.
How Do They Work?
In addition to the obligee and the principal, there is a third party to every Utah proprietary school bond. That's the bond’s guarantor, known as the surety. The principal is legally obligated to pay all valid claims against the bond, but the surety guarantees their payment.
A student, parent, or sponsor who incurs monetary damages because of the principal’s unlawful or unethical business practices has the right to file a claim against the bond and seek compensation.
How Are Claims Paid?
Upon receipt of a claim against a Utah proprietary school bond, the surety will conduct an investigation to make sure the claim is legitimate before approving it for payment. Although the principal is legally obligated to pay all valid claims, the surety, having guaranteed their payment, typically pays a valid claim initially to ensure a swift resolution of the matter. But the legal obligation for the claim amount still belongs to the principal, who must then repay the debt to the surety. The surety can take legal action against a principal who fails to repay a claim that was paid by the surety on the principal’s behalf.
How Much Do They Cost?
The annual premium cost of a Utah proprietary school bond is the product of multiplying the required bond amount set by the obligate and the premium rate assigned to the principal by the surety. The premium rate is the result of an underwriting process aimed at determining how risky it is for the surety to pay claims on behalf of the principal.
That risk is measured based largely on the principal’s personal credit score, which is considered a good indication of the likelihood that the principal will repay the surety as required. A high credit score suggests that the risk to the surety is quite low, which results in a low premium rate. The reverse is also true. A low credit score suggests a higher risk level 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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