If you’re currently operating a private school or plan on opening one in the future it’s essential that you understand what private school bonds are and how they impact your business.
Private School Surety Bonds—The Basics
When you run a private school, you’ll be required to maintain an active private school surety bond in order to get licensed.
A private school surety bond always contains three parties:
- The principal who is the private school purchasing the bond
- The obligee who is the agency, business or individual who requires the bond
- The surety who is the underwriter of the bond
This type of surety bond is required by the state as a guarantee that your school will provide the agreed-upon services that tuition covers. If you fail to deliver the services that were paid for, either because you’re unable or unwilling, the parents of your students will be able to make a claim against the bond for the cost of the tuition.
Private School Bonds Are More Like Credit Than Insurance
One important thing to understand about private school bonds is that if a claim is made against the bond you will be liable for the money needed to pay the costs. Although the surety will make the payment initially, they’re only actually providing a form of credit and you will need to repay all costs associated with the claim.
Understanding the Bond Requirements
The bond amount needed is based on the tuition fees charged by your school and the number of pupils you serve. This means that you’ll need to calculate the amount of prepaid tuition fees your school has on hand over a set period of time. So why is the bond amount unique to the school and not a set figure? This is because the bond amount needs to be able to pay potential claims made for all current tuition payments should your school fail to provide the agreed-upon services. This number is unique to your school and may not be adequately covered by a fixed amount.
Securing A Private School Bond
Finding the right private school surety bond for your needs is a simple process when you use an experienced bonding company. To complete the application process you’ll need to provide details about your school including the number of pupils and tuition amounts. You’ll also need to submit supporting documentation detailing your credit history and business experience. This information is used to calculate your bond premium and underwrite the bond.
If you’d like help finding an affordable bond to comply with your state’s licensing requirements, call our experienced team of bond agents today!