Surety Bond Insights: August 2017 Articles and TrendsAugust 2017

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So you’ve heard of surety bonds and fidelity bonds, and after reading What is a Surety Bond, Anyway? you’re a surety bond expert. Time to brush up on fidelity bonds.

Surety Bonds: A Comprehensive Recap of Key Information

Before diving into fidelity bonds, here’s a quick refresher on surety bonds:

A surety bond is an agreement between three parties:

• The principal, the person buying the bond
• The obligee, the entity requiring the purchase of the bond
• The surety, the company providing financial backing for the bond

Surety bonds are the principal’s guarantee that they will uphold the terms of their bond. The bond provides customers a way to seek reimbursement if the principal causes them financial damage.

What are fidelity bonds?

Fidelity bonds are more like insurance, because they protect the bondholder from any dishonest or fraudulent actions by certain people, usually the company’s employees. For this reason, fidelity bonds are sometimes called dishonesty bonds.

Usually the person who the bond protects against are those who handle company finances, like an accountant or employees who handle customer transactions. If an employee commits fraud, whether by outright stealing money or merchandise or by embezzling, the fidelity bond offers the bondholder a way to recoup their losses. These bonds are especially useful when employee theft is not covered by the bondholder’s existing insurance policies.�Choosing to purchase a fidelity bond gives your business added protection against employees who intend to do harm to you and your business.

Fidelity bonds can be easily confused with business service or janitorial service bonds�Florida and Alabama are just examples; you can get these bonds in any state. These bonds protect clients from employee theft in professions where employees visit clients’ homes, like housekeeping services or pest control. They function like other surety bonds, as a means of security for customers. It’s important to remember that fidelity bonds are for you and your business’s protection.

Think you might need a fidelity bond or other surety bond? Single Source Insurance can help you get bonded today!

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Oregon SB 98 brings about changes in the law for residential mortgage loan servicers, who must now post a surety bond and get a license in order to do business. The new law will take effect on January 1, 2018.

Residential mortgage loan servicers receive mortgage payments from borrowers and pay the lender or other person principal, interest, or other agreed-upon amounts in accordance with the contract between the servicers and the lender. Servicers also pay the borrower “if the residential mortgage loan is a home equity conversion mortgage or a reverse mortgage.”

Oregon residential mortgage loan servicers will apply for licensure through the state Department of Consumer and Business Services. The Director of the Department will decide whether applicants will submit their information to the Department itself or through the Nationwide Multistate Licensing System (NMLS). Listed is some of the information required with an application:

• Fingerprints from all applicant’s controllers, registered agents, or managers
• Applicant’s NMLS unique identifier
• Name and address of applicant’s registered agent
• Street address of applicant’s principal place of business and addresses of any other branch offices where the applicant will perform service residential mortgage loans
• Name of managers of any branch office the applicant maintains in Oregon
• Business name under which the applicant will operate (if any)

�The Director may require other information from would-be mortgage loan servicers, and the applicant will also be required to pay any fees specified by the Director by rule. Along with this information, the mortgage loan servicer applicant must also submit a surety bond in an amount the Director will also specify by rule. The surety bond guarantees that the servicer will service residential mortgage loans in accordance with Oregon law. Clients can file a claim against the surety bond if the servicer breaks the terms of the bond, causing the client monetary damage.

A registered agent, as required in the application, is a person in the state of Oregon who is “available to receive on the licensee�s behalf any notice, demand or service of process permitted by law to be given, made or delivered to, or served upon, the licensee,” per Section 5 of SB 98. Residential mortgage loan servicers are also expected to maintain sufficient liquidity, operating reserves, and tangible net worth to meet the costs of servicing mortgage loans. The amount required will be specified by rule by the Director.

Be sure to read SB 98 in its entirety to understand what the new licensing process means for your residential mortgage loan servicer application. Starting your application and need an Oregon surety bond? Single Source Insurance can help.

Nebraska’s LB 512 introduces some new requirements for for-profit postsecondary schools in the state. The surety bond provisions of the law take effect on September 1, 2017, though other sections of the bill had an immediate effective date of May 23, 2017.

For-profit postsecondary schools offer higher education opportunities following high school. LB 512 establishes the Guaranty Recovery Cash Fund, which is a form of security for students at for-profit postsecondary schools. The Fund provides students a way to reimburse students for any tuition or fees paid and for�the cost of obtaining records if the institution were to close. The Fund is subsidized by an annual fee for postsecondary schools, in the amount of one-tenth of one percent of the previous year’s gross tuition revenue. The fee is assessed until the�Fund reaches its minimum level of $250,000 (the Fund has a maximum level of $500,000). If the Fund dips below the minimum level, the Commission for Postsecondary Education�may resume collecting the fee.

Nebraska postsecondary schools may be required to post a surety bond until the Fund is at the minimum level. During the school’s first year of operation, they will not be assessed the Fund fee. After the first year, the Fund fee is assessed annually for four years or until the minimum Fund level has been reached, whichever comes last.

When postsecondary schools request an initial recurrent authorization to operate�is when the Commission requires the school to post the surety bond to serve much the same function as the Fund serves. The bond can reimburse students for tuition and other educational expenses should the school close, added security until the fund reaches its minimum level or until the school has been in operation for five years or more. Surety bonds for Nebraska postsecondary schools give for-profit institutions’ students reassurance in the event of the school’s closing.

Ready to get a Nebraska surety bond? Single Source Insurance can help!

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Oregon HB 3461 introduces a change for certain tobacco manufacturers in the state. Any non-participating tobacco manufacturers�meaning they chose not to participate in a 1998 Master Settlement Agreement reached between Oregon and 45 other states and four large domestic tobacco manufacturers�must post a surety bond. The new law took effect on August 8, 2017.

In the Master Settlement Agreement (MSA), participating tobacco manufacturers agree to pay into a state fund reserved for settling state claims against the tobacco industry to recover state healthcare costs. Non-participating tobacco manufacturers pay into an escrow account based on their cigarette sales; the fund is used for the same purpose as the MSA, to settle claims made against a non-participating manufacturer. After 25 years, any money in the escrow account that has not been used to pay claims is returned to the manufacturers.

HB 3461 introduces new provisions for Oregon non-participating tobacco manufacturers, including requiring them to post a surety bond. The bond has been made a legal requirement to ensure that non-participating manufacturers make their escrow payments on time and in the correct amount. The bonds must be posted quarterly and their amount is one of the following, whichever is greater:

• The greatest required escrow amount due from the manufacturer or its predecessor for any of the 12 preceding calendar quarters
• $25,000

If the non-participating tobacco manufacturer does not make the required quarterly escrow payment within 15 days of its due date, the Attorney General can execute on the bond, meaning the state can seek payment through the surety bond. The Attorney General may also accept forms of security other than surety bonds as he or she sees fit.

Tobacco manufacturers, participating or non-participating, can contact the Oregon Department of Justice�or their licensing bureau, the Department of Revenue, with questions about their rules and regulations. If you need an Oregon surety bond, get in touch with Single Source Insurance today.

Minnesota public adjusters must become licensed before doing business in the state, either as a resident or nonresident. Find out what to do if you want to get licensed and bonded.

What is a public adjuster?

Public insurance adjusters work with clients when they file a claim with their insurance company, like after a natural disaster or car accident. The client hires the public adjuster to negotiate with the insurance company on the client’s behalf, and the adjuster ensures that the client is compensated fairly in accordance with their insurance coverage. The public adjuster is paid an agreed-upon percentage of the settlement that is reached with the insurance company.

Licensing for Minnesota public adjusters

Minnesota public adjusters that are residents of the state apply for their licenses online through the�Commerce Department. There is a $50 application fee plus a $10 technology surcharge when submitting the application. Before attempting to become licensed, would-be public adjusters must pass an exam, which they can schedule online or by calling 1 (800) 733-9267.�Minnesota public adjuster applicants must submit their fingerprints for background checks along with a Background Check Consent Form.

Nonresidents applying for a Minnesota public adjuster’s license must complete the same online application and pay the same fees. There is no exam requirement for nonresident public adjuster applicants.

Getting a surety bond

Both resident and nonresident Minnesota public adjuster applicants need to purchase a $10,000 surety bond when submitting their application. The original surety bond must be mailed to the Commerce Department at the following address:

Minnesota Department of Commerce�Licensing 85 7th Place East #500 St. Paul, MN 55429

Purchasing and signing a surety bond is the public adjuster’s guarantee that he or she will adhere to Minnesota Statutes Chapter 72B. Public adjusters in Minnesota can face license suspension or revocation, denial of license application, or fines of up to $500 for failing to adhere to their profession’s rules and regulations.

Have you been hearing the phrase, “licensed, bonded and insured” and wondered why it was important? You’re in the right place to learn about what the phrase might mean for you and your business.

Licensed

“Licensed” is probably the most obvious and least confusing part of the phrase. Almost every business requires a license of some kind, whether that means registering the business with the Secretary of State or involves a more complicated process like taking an exam and disclosing extensive financial information.

Whatever the requirements for business licensure, working with a company you know is licensed is reassuring. Their licensure proves that they went through the appropriate channels to get licensed. When it comes to tests, fees, or other prerequisites for licensure, you can be sure that the licensee has done what’s required. A majority of businesses display their licenses, or are legally obligated to, and so you can look up their license with the government entity that issued it to verify that it is current.

Bonded

This is the part that can get confusing�why does it matter if the business is bonded? As we covered in our previous post, “What is a Surety Bond, Anyway?” surety bonds are contracts between three different parties:

• The principal�the person or business purchasing the bond
• The obligee�the entity requiring the purchase of the bond
• The surety�the company providing financial backing for the bond

So why do some companies advertise themselves as “bonded?” It’s because that surety bond is a form of protection for customers while also communicating that the business is compliant with the law, as surety bonds are usually a legally required purchase. As with licenses, surety bonds can be verified through the surety company issuing the bond.

Some businesses, especially cleaning services and other in-home businesses like pest control, purchase a surety bond even though they aren’t required to by law. If a business is bonded even though they don’t have to be, they’re providing an extra layer of security and conveying their trustworthiness to clients. A bond is, first and foremost, a promise by a business to obey the law and conduct business ethically. Should the business break that promise, a bond provides a way for customers to seek reimbursement.

Further, getting bonded is a thorough process involving underwriting, which means that the applicant’s financial history is examined. Surety companies avoid writing bonds if they believe the bond to be high-risk, meaning the bondholder is likely to use the surety bond. If the surety company believes the bondholder is too high-risk and unlikely to reimburse paid claims, they can refuse to write the bond.

A bonded business invokes trustworthiness because it’s in the best interests of both customers and the business to abide by its terms. If a business has to use their surety bond, there can be consequences�the bondholder has to reimburse the surety company for claims that are paid, the bond’s premium might increase, and the business might face consequences like fines or losing its license. Bonded businesses will surely work to avoid those consequences.

Insured

You probably already know what it means to be insured, but businesses must often carry many different types of insurance. These can include workers’ compensation, professional liability, or property, among others. Insurance is almost always a requirement for business licensure and it’s especially important when it comes to professions like construction. Just like with licenses and surety bonds, you can call the insured’s insurance company to verify that their policy is current.

Many businesses use the phrase “licensed, bonded and insured”�in advertising to establish trust with potential customers. You can always confirm that the business is advertising truthfully by verifying their license, bond, and insurance policies. Using the phrase is another way of making a promise (or three!) to customers.

Need a surety bond for your business, or think you might? Ask questions and get answers when you contact Single Source Insurance today!

Florida mobile home dealers must �become licensed and get a surety bond before they can conduct business in the state. Getting licensed and bonded can be a confusing process, so keep reading to learn more about it.

Florida Mobile Home Dealers’ Licensing Requirements

Florida mobile home dealers submit an application through the Department of Highway Safety and Motor Vehicles. They can choose a license classification, mobile home dealer or mobile home broker. Dealers can sell both new and used mobile homes at retail or wholesale, while brokers can sell only used mobile homes at retail or wholesale. Mobile home dealers must get a license if they sell one or more homes in a twelve-month period.

Florida mobile home dealers’ license application is also used for various types of motor and recreational vehicle dealers. Information mobile home dealer applicants will need to include is as follows:

• Type of business (sole proprietorship, LLC, partnership, corporation, etc.)
• DBA name and business address
• Sales tax and federal employee identification numbers
• Names of all partners, owners, or members and contact information
• Copy of property lease or proof of ownership
• Fingerprints for each individual listed on the application
• Copy of dealer training course completion certificate
• Copy of certification from the Division of Corporations showing current business registration
• Original $25,000 surety bond

The full list of required information can be found in the application. Florida mobile home dealers must also submit a fee of $300 per business location plus $40 for the Mobile Home and Recreational Vehicle Trust Fund.�They must have garage liability insurance in minimum amounts of $25,000 combined single-limit liability coverage including body injury and property damage protection, and $10,000 for personal injury protection.�Mobile home dealers must have their business location approved by a DMV representative, who can be contacted through their Regional Offices.

Surety Bond Requirement for Mobile Home Dealers

Florida mobile home dealers’ surety bond is a promise to the DMV and to customers that they are operating in accordance with the law. Should a mobile home dealer violate the Florida Statutes or any other applicable laws, the surety bond provides customers a way of seeking compensation for any damages. Dealers doing business legally and ethically should have no reason to use their surety bond, but neglecting the bond can result in being charged with a misdemeanor and facing up to six months in jail and fines of up to $500 per violation.

Did you learn that you’re ready to purchase a Florida mobile home dealer surety bond? Get in touch with Single Source Insurance and get bonded today!

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Oregon vehicle dealers will see their required surety bond coverage amount increase with the passage of SB 974, which takes effect on January 1, 2018. Keep reading to learn more about the changes.

Oregon vehicle dealers are licensed to sell either motor vehicles or motorcycles, mopeds, snowmobiles, and/or ATVs. Under current law, motor vehicle dealers need to purchase a $40,000 surety bond, and motorcycle, moped, snowmobile, and/or ATV dealers need a $2,000 surety bond before licensure. Claimants on motor vehicle dealers’ surety bonds can receive no more than a $20,000 payout.

SB 974 changes these amounts for Oregon vehicle dealers. Motor vehicle dealers will need a $50,000 surety bond when seeking licensure, and�motorcycle, moped, snowmobile, and/or ATV dealers will need a $10,000 bond. The maximum payout on motor vehicle dealers’ surety bond decreases with the new law, from $20,000 to $10,000.

Oregon vehicle dealers submit their applications and receive licenses through the Driver and Motor Vehicle Services division of the Department of Transportation. Vehicle dealers must submit the following information to the DMV to become licensed:

• Completed application with copies photo IDs for every partner, owner, LLC member, or corporate officer
• Plate billing list (if a renewal applicant)
• Signed surety bond
• Liability insurance certificate
• Education certificate (from DMV-approved provider) or Certificate of Exemption
• $1,187 certification fee plus $350 per additional location and $54 per plate (one included in original certification fee)

SB 974 also ends the issuance of new certifications to become dealers of exclusively motorcycles, mopeds, snowmobiles, and/or ATVs after the law’s effective date. Individuals already licensed as such can continue to operate as licensed, but will need to apply for a vehicle dealer certification when their license expires. Per the new law, no one but a retail customer may make any claims on a dealer of recreational vehicles’ surety bond.

Ready to get an Oregon vehicle dealer surety bond? Single Source Insurance can help you get bonded for less.

Even though surety bonds and insurance often come up in the same conversation, or are confused with each other, they’re far from being the same thing. Let’s take a look at some similarities and differences between the two tools.

How are surety bonds and insurance similar?

Surety bonds and insurance are both issued through insurance companies�if you’re purchasing a surety bond that requires underwriting, it’s underwritten by an insurance company.�Both are risk-reduction tools, working as a means of seeking financial recourse.

As you can see, there aren’t many similarities between bonds and insurance, but there are plenty of differences.

How are they different?

Surety bonds and insurance are agreements between parties, but insurance only involves two parties (the insurance company and the policy holder) while surety bonds involve three parties, as discussed in a previous blog post. Those parties are the principal, the person purchasing the bond, the obligee, the entity requiring the bond’s purchase, and the surety, the company providing financial backing for the bond.

While surety bonds and insurance are used to manage risk, risk is assumed differently: with a surety bond, the principal is assuming risk; with insurance, the insurance company is assuming risk. The principal has to pay back the surety if a claim is paid out from their bond, but an insurance policy holder receives payment from the insurance company if they make a claim and it’s covered under their policy.

When purchasing a surety bond, the principal does not expect to have to reimburse the surety company, and the surety company doesn’t expect to pay out on a claim. This is because a surety bond is the principal’s promise to uphold the terms of the bond, and if they don’t, their penalty is repaying the surety for claims that were paid.�Insurance policy holders, on the other hand, purchase insurance with the expectation that they will need to use it, and insurance companies expect to pay claims.

The most fundamental difference between surety bonds and insurance is in who they protect. Insurance protects the person who purchases it; that’s why we buy insurance. Surety bonds, however, protect consumers by entering business owners into contracts in which they promise to follow the law and the terms of the surety bond. They also protect the entity that requires them to be purchased�a governmental entity or other individual named as the bond’s obligee can make a claim on a bond should the principal violate its terms.

It’s important to remember the differences between surety bonds and insurance because many businesses and professionals are legally obligated to have both types of coverage. Ready to get a surety bond, or still have more questions about the two types of coverage? Single Source Insurance can answer your questions, so get in touch today.

With the passage of SB 321, South Carolina RV dealers will need to increase their surety bond coverage after the new law takes effect on January 1, 2018. It also creates a new licensing procedure for RV dealers in the state.

South Carolina RV dealers sell more than five recreational vehicles�motorhomes, travel trailers, fifth-wheel campers, and folding (pop-up) campers�per year and must be licensed through the state Department of Motor Vehicles�after SB 321’s effective date. They will also be required to post a $30,000 surety bond to become licensed.�Under current law, RV dealers are licensed as travel trailer dealers and post $15,000 surety bonds when applying for licensure.

The new licensing process introduced by SB 321 requires South Carolina RV dealers to submit an application to the DMV that includes the following information:

• Names and addresses of any individuals owning or controlling 10 percent or more of the interest in the business
• $30,000 surety bond
• Any other information required by the DMV

The license expires on the last day of the month twelve months after it was issued�for example, a license issued�on January 1 would expire the following year on January 31. RV dealers must notify the DMV of changes to information on their licensing applications within 30 days, and must notify the DMV within 10 days if they cease operations as RV dealers. They must also keep records of every RV transaction for four years from the transaction date.

South Carolina RV dealers’ places of business must adhere to certain standards detailed in SB 321:

• Permanent, enclosed building with at least 96 square feet of floor space
• Display a permanent sign identifying the business in letters at least six inches high, visible from the nearest road
• Reasonable area or lot to display RVs

South Carolina RV dealer license applicants should note that the new surety bond amount does not apply to RV wholesalers; they still need a $15,000 bond.

Ready to get a South Carolina surety bond? Get in touch with Single Source Insurance today.