Maine Private 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 Maine Private School Bond needs.
What Are Maine Private School Bonds?
Maine private school bonds require proprietary technical, trade, or business schools to operate in compliance with applicable Maine statutes and regulations and deliver to students the educational services that their tuition dollars entitle them to. This includes not misleading prospective students to increase enrollment and living up to the terms of their student contracts.
In short, Maine private school bonds provide financial protection for students (and their parents or guardians). In the worst case scenario, in the event that a school ceases operations without refunding prepaid tuition or “teaching out” its last class, the bond provides a way to compensate the injured parties.
Who Needs Them?
Every private business, trade, or technical school seeking a license (new or renewal) to operate in the state of Maine must be licensed by Maine’s Department of Education. Purchasing a Maine private school bond is a mandatory step in the licensing process.
The required bond amount is the larger of $20,000 or 10% of the school’s gross revenue from tuition in the prior 12 months. The Department of Education (the bond’s “obligee”) will let the school’s owner (the bond’s “principal”) know what the required bond amount is.
How Do They Work?
A Maine private school bond is legally binding on the obligee requiring the bond, the principal purchasing the bond, and a third party known as the “surety.” This is the bond’s guarantor.
When an injured party submits a claim for monetary damages, the surety is responsible for determining whether it is legitimate and approving it for payment.
How Are Claims Paid?
The principal bears full legal responsibility for paying valid claims, but the surety has guaranteed their payment. More precisely, the surety has agreed to lend the principal the money needed to pay such claims. Furthermore, to ensure a swift resolution, the surety will pay a valid claim on behalf of the principal, which creates a debt that the principal must then repay according to the credit terms established by the surety. The surety can take legal action to recover the funds from the principal if that becomes necessary.
How Much Do They Cost?
Maine private school bonds are sold for an annual premium that is the result of multiplying the $20,000 bond amount by the premium rate assigned by the surety. The premium rate is determined through an underwriting process that aims to assess the risk the surety will be assuming in agreeing to extend credit to the surety.
The main concern, of course, is the risk of not being repaid by the principal. The underwriters will measure that risk largely on the basis of the principal’s personal credit score. The assumption is that someone who has been fiscally responsible in the past will continue to repay debts on time, making the risk to the surety low. So, a high credit score results in a low premium rate, while a principal with a lower credit score 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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