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Driving School Bond

(Aka: DMV Driving School Surety Bond)

The Driving School Surety Bond is a type of surety bond required by some states in order to obtain and maintain a license to operate a driving school. The bond is put in place to protect the student's unearned, prepaid tuition against any potential fraud or misrepresentation by the driving school. If a breach in the contract between the school and the student or a violation of applicable state law occurs, a claim can be made on the bond.

The Driving School Bond amount can vary state by state. In most cases, there is a minimum bond amount required by state statutes with an additional amount or bond required for additional school locations.

What is a Driving School Bond?

Surety bonds for driving schools are intended to protect the public from unscrupulous operators. They hold schools financially responsible if any misdeeds occur. Surety bonds also create a mechanism to ensure punitive fees and fines are paid.

How does a Driving School Bond work?

There are many rules that apply to driving schools specifically, and if any of those rules are broken, it could put lives at risk or pose a danger to property. If a driving school breaks the rules, regardless of the consequences, the state agency that regulates them may file a claim against the bond seeking payment for any fines or fees charged to the driving school. As long as the details of the claim hold up under investigation, the surety company that backs the bond pays all claims in full. However, the surety does not intend to take a financial loss after paying a claim. Surety bonds work more like a line of credit. Whenever the surety pays to settle a claim, the bonded party must pay the surety back with interest and fees added - otherwise the debt goes into collections.

Who should get a Driving School Bond?

Anyone planning to open a driving school in a state that requires the bond. Why, does this requirement exist, you may wonder? State agencies tasked with protecting the public have a vested interest in policing driving schools. If one of these schools is mismanaged, it puts students and even other drivers at risk. In order to ensure the public is compensated if anything goes awry, having a bond is a condition for getting a business license for a driving school. Without this license, your business is considered illegal. Penalties for running a driving school without a license vary by state and depend on the severity of the crime, but in all cases they are significant. These are some of the potential penalties:

  • Being banned from ever getting a driving school license
  • Having to pay fines for individual violations
  • Damaging the reputation of your driving school

The best policy is to obtain a driving school bond as soon as you discover you need one. Then begin budgeting money to pay the annual bond renewal premium. Bonds are yet another business expense, but the cost of carrying a bond is always smaller than the cost of not carrying one.

Who are the parties involved in a Driving School Bond?

Unlike insurance coverage or a loan agreement that are made between two parties, driving school surety bonds is a contract between three parties:

  • Obligee – This is whatever government entity, acting on behalf of the public interest, requires your driving school to have a bond. It's different in every state, but the obligee is typically whoever is responsible for regulating driving schools generally. The obligee determines how large the bond needs to be and carries out enforcement against schools that fail to obtain the legally-required bond.
  • Principal – This is you, the person taking out the bond. The principal agrees to pay the bond premiums as well as pay for any claims made against the bond.
  • Surety – This is the company that issues the driving school surety bond. If a claim is made against the bond, the surety company investigates it and pays for all valid claims up to the total of the bond. The surety company then collects the amount from the driving school that carries the bond. Basically, the surety company accepts the risk of ensuring the principal meets the requirements set by the obligee.
  • How much does a Driving School Bond cost?

    The cost of a surety bond for driving school depends on several factors. The state may mandate a minimum bond requirement, and the cost can vary widely. In Ohio, for instance, it's as low as $2,000 compared to Illinois where it's $50,000. Keep in mind these figures only refer to the level of coverage. The cost to you, the principal, is a percentage of that, usually around 1-5%. The amount you pay is determined after you submit an application to Viking Bond Service. For help figuring out exactly what your state minimum bond requirement is and what the cost is to you, rely on our team to provide the best quote for your bond.

    We can also help bond seekers who have bad credit. Since surety companies approve or deny applicants based largely on their credit score and financial history, some people who need bonds can't get one - at least not without the help of Viking Bond Service. As a nationally licensed surety agency, we have ample resources and connections across the country that we can use to help more applicants secure bonds regardless of their credit. These applicants may pay slightly more than others, but they're not excluded from the bond process, which means they're not excluded from opening a driving school either.

    How are claims handled for Driving School Bond?

    The surety settles all valid claims, but it never assumes claims are valid regardless of the circumstances. Instead, the surety thoroughly investigates every claim it receives using whatever resources prove necessary - lawyers, professional investigators etc. False claims get denied, but the surety pays the valid claims immediately. When that happens, the debt the principal owed to the obligee shifts to the surety. The principal must pay that debt back, along with interest and the cost of the investigation, within a reasonable time frame or risk serious damage to their credit and ability to be bonded in the future. Bonds exist to discourage negative behaviors on the part of driving school operators. One way they do that is by making claims punitive, meaning it costs more to settle claims than it costs to prevent someone from making a claim.

    How to apply for a Driving School Bond?

    Leading surety companies like Viking Bond Service design the bond application to be easy, intuitive, and quick to complete. Generally, all you will need to apply is some basic financial information about your driving school and your personal finances. You may need financial information from business partners as well, or additional information if requested by Viking Bond Service.

    After the application is submitted, underwriters will estimate how much financial risk you pose for the surety company based on your financial and credit history. Essentially, they determine how likely you are to pay back any compensation made to settle a claim. Applicants with bad credit pose a higher risk, but they can typically still get a bond if they are willing to pay higher premiums. Viking Bond Service begins evaluating your information soon after submission and typically returns with a quote in only a day or less.

    The final step in the process is to pay the premium for the bond, which activates it for 12 months. You will then receive a document you can provide to the relevant state agency to prove you have a fully-compliant bond. You will need to keep that bond active for as long as you run the driving school, which means renewing it on an annual basis. Renewal works much like the initial application: you submit personal and financial information that underwriters use to evaluate risk and quote a premium price. If your credit has gone up or down in the year since the last renewal, the bond premium may go up or down as well.

    Viking Bond Service - Get Your Business Rolling

    To receive a Driving School Bond quote or to learn more information about any of Viking Bond Service surety bonds, you can call us at 1-888-278-7389 and speak with a Viking Bond Service representative who is happy to help you. You can also contact us by choosing to either complete an online application or fill out our contact form on the current page.

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