Blog Posts Categorized: General - Page 22

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.

Washington money transmitters and currency exchangers must adhere to the provisions of SB 5031 following its passage in April and subsequentJuly 23, 2017 effective date.

A notable impact SB 5031 makes on Washington money transmitters is in its elimination of allowing other forms of financial security in place of a surety bond. This means that applicants will no longer be allowed to submit certificates of deposit or any other form of security the Director of the Department of Financial Institutions previously accepted.

The surety bond amount is calculated based on the previous year’s money transmission and payment instrument dollar volume. The bond must be at least $10,000 and no more than $550,000, though the Director may increase the bond up to $1,000,000. The surety bond is continuous until cancelation, which becomes effective 30 days after the Department receives written notice of its cancellation. The bond must cover claims for five years following the money transmitter’s violation of state and/or federal laws, or for five years after the business stops providing money transmission services, whichever is longer.

Washington money transmitters, like money transmitters in most states, are licensed through the Nationwide Multistate Licensing System (NMLS). Washington state has a list of prerequisites prepared for money transmitter applicants that should be reviewed before submitting an application. Among other requirements, some of the prerequisites include the following:

• Tangible net worth of at least $10,000 per $1 million of money transmission and payment instrument volume; minimum net worth of $10,000 and maximum of $3,000,000
• Registration as a Money Services Business (MSB) with the U.S. Department of the Treasury
• Master Business License issued by the Washington State Department of Revenue’s Business Licensing Service
• If the company is not a sole proprietorship, it must be registered with the Washington Secretary of State

The state has also assembled a list of general licensure requirements for Washington money transmitters, which is meant to give applicants an idea of any issues that might come up during their application process. Some of the information required on the license application is as follows:

• $1,000 for corporate business location and NMLS processing fee
• Criminal background check ($36.26) and credit report authorization ($15) for all control persons
• DBAs and other trade names
• Resident or registered agent if business’s corporate location is out-of-state
• MSB and Master Business License numbers
• Recent audited financial statements for the business, or for individuals if sole proprietorship
• Original, signed, sealed surety bond

Online currency exchangers in Washington must also become licensed and acquire a surety bond under SB 5031. Currency exchangers exchange one government’s currency for another’s. Currency exchangers apply for the same licenses as money transmitters, but their surety bond must be between $10,000 and $50,000, with rules to be implemented by the Director. Their bond must have a one-year tail on claims as opposed to money transmitters’ five-year tail.

Ready to get a Washington state surety bond? Get in touch with Single Source Insurance today!

HB 1542 takes effect on January 1, 2018, and will require Virginia home service contract providers to post a surety bond when becoming licensed.

Virginia home service contract providers offer contracts that are for the repair, service, replacement, or maintenance of residential property or to cover the cost of service, repair, replacement, or maintenance of property that failed due to defects in materials or workmanship or due to normal wear and tear. Home service contracts can also cover roof leakage and damage sustained from power surges.

HB 1542 moves oversight of Virginia home service contract providers from the Department of Insurance to the Department of Agriculture and Consumer Services (VDACS). Providers must obtain a license from the VDACS and pay a $300 registration fee every year. Licenses must be renewed annually on or before July 1, and if a provider fails to register before selling a contract, the provider will be fined a $100 late filing fee for every 30-day period or portion thereof that registration is late. Providers that do not renew their registration on time must pay a $50 late fee�for every 30-day period or portion thereof that registration is late.

The surety bond required of Virginia home service contract providers will be determined based on the value of unexpired home service contracts the provider has sold. The bond amount is determined as follows:

• $50,001 to $300,000 in contracts�$40,000 surety bond
• $300,001 to $750,000 in contracts�$65,000 surety bond
• $750,001 or more in contracts�$90,000 surety bond

Home service contract providers’ surety bonds guarantee that they will not cause financial damage to customers. In the event that a provider causes a customer to incur financial damage, the customer can file a claim against the provider’s surety bond and seek reimbursement.

Ready to get bonded as a home service contract provider? Get in touch with Single Source Insurance today!

Alabama natural gas public sellers and fleet producers will be required to get a license and post a surety bond following HB 333‘s passage. The new law takes effect on October 18, 2018.

Alabama natural gas public sellers operate service stations where compressed or liquefied natural gas�CNG or LNG� are sold to the public for use in vehicles. Fleet producers produce the CNG or LNG. HB 333 also creates a license for sellers and producers and a system for licensing natural gas.

HB 333 requires Alabama natural gas public sellers and fleet producers to apply for licensure through the Department of Revenue. In order to become licensed, applicants must submit a $50 application fee plus $25 for each additional business location. Sellers and producers must also obtain a surety bond that is $25,000 or approximately twice the seller or producer’s average monthly tax liability.

HB 333’s effective date will also bring a new excise tax on CNG and LNG. An excise tax of $.08 per diesel or gasoline gallon equivalent (DGE or GGE) will take effect on October 1, 2018.�On October 1, 2023, the excise tax will increase to $.13 per DGE or GGE. In lieu of the excise tax for personal producers of CNG, the state will assess a $100 application fee to be paid each year by January 20, beginning January 1, 2019.

The excise tax levied on Alabama natural gas public sellers and fleet producers brings about the surety bond requirement, since the bond is a guarantee that sellers and producers pay their taxes on time and as required. The surety bond amount will be reviewed by the Department every five years after January 2023 to ensure every seller and producer’s bond amount is sufficient.

Alabama natural gas public sellers and fleet producers must pay their taxes before the 20th of each month for the previous month, to be submitted with a report detailing the amount of CNG and LNG sold.

Ready to get an Alabama surety bond? Single Source Insurance can help! Get in touch and get a quote today.

�

Texas driver education schools can post a lesser surety bond following HB 912‘s passage. The new law took effect when HB 912 was passed on June 15, 2016.

Drivers under the age of 18 must complete a driver education course offered through a Texas driver education school, parent-taught, or through a public school. Driver education schools must obtain a license and previously, a $25,000 surety bond. HB 912 decreases the required surety bond to $10,000. Driver education schools must increase their bond amount by $5,000 for each additional branch location of the school. A Texas driver education school surety bond serves as proof of the school’s financial stability and guarantees that the school will comply with Texas Education Code Title 5 Chapter 1001.

To get a Texas driver education school license, applicants must apply through the Texas Department of Licensing and Regulation (TDLR). Licensee applicants must include the following information on their application:

• DBA/assumed name of school
• Organization type
• School mailing �and physical address and contact information
• Owner information
• Signature of applicant, officer, or other authorized school representative
• Fee sheet and fees (including $1,000 license application fee)
• Original surety bond
• Copy of current insurance in the amount specified in the Transportation Code Chapter 601
• Staff roster
• Driver education course list

The full list of required documents is detailed on the Texas driver education school application, and all forms areavailable through the TDLR.

In addition to the decreased surety bond for Texas driver education schools, HB 912 allows driver education courses’ certificates of completion to be issued electronically. Under previous law, the certificate had to be printed. HB 912 also clarifies requirements for who can conduct parent-taught driver education, requiring that they are at least 25 years old with at least seven years’ driving experience, among other regulations.

Ready to get your Texas driver education school licensed and bonded? Contact Single Source Insurance for your Texas surety bond!