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TABC Conduct Surety Bond

What is a Conduct Surety Bond?

A Conduct Bond is a surety bond required by the Texas Alcoholic Beverage Commission (TABC). This surety bond is required of retailers that do not hold a food and beverage certificate but serve alcoholic beverages on the premises. A Conduct bond may be required of a retailer whose gross receipts come primarily from the sale of alcoholic beverages.

TABC Conduct Surety Bonds are usually $5,000 bonds. Higher bond amounts may be required. According to the TABC, the bond amount is determined by the retailer's distance from the nearest public school.

How does a Conduct Surety Bond work?

The Conduct Bond is required to maintain the license or permit needed to continue to operate the retail location. The bond provides a form of guarantee that the retailer will abide by the TABC code, rules and state laws regarding alcoholic beverages.

In the instance where a retailer violates these laws, the state can place a claim on the bond. The surety, the company providing the guarantee behind the surety bond, would be responsible for payment to the state up to the amount of the bond. If a claim was filed on the bond, the surety would pay the state then attempt to collect from the retailer the amount paid on the claim. The retailer is still ultimately financially responsible for any amount paid out on a claim by the surety. In addition to repaying the surety the entire amount of the claim, the retailer must pay interest and fees. These additional costs, along with the financial liability for all claims, create a powerful incentive for retailers to follow all TABC regulations.

Who should get a Conduct Surety Bond?

That's up to the TABC to determine. Typically, the bond must be obtained before a business is allowed to operate legally. There could be financial and legal penalties for operating without a bond, so it's in the interest of anyone required to get a bond to fulfill this requirement sooner rather than later. Viking Bond Service, a nationwide surety brokerage with connections to bond companies across Texas, can help you get a bond quote in as little as 24 hours.

What is the purpose of a TABC Surety Bond?

Surety bonds help to enforce laws and regulations created by the TABC by holding retailers financially accountable for any rules they break. Retailers have good reason to follow those rules knowing they can't evade their responsibility to pay for any damages that result. Surety bonds also streamline the claims payment process and guarantee the TABC a way to collect on debts owed by retailers that break the law.

What are the Conduct Surety Bond requirements?

Surety bond requirements can change, so the best source for the current requirements is either the TABC or a trusted surety provider like Viking Bond Service. The TABC conduct surety bond requirements are as follows:

  • Bondholders located more than 1,000 feet from a public school will need a bond valued at $5,000.
  • Bondholders located less than 1,000 feet from a public school will need a bond valued at $10,000.

Who are the parties involved in a Conduct Surety Bond?

There are three parties in all surety bond agreements, each with a different role to play:

  • The Principal - The principal is the business required by the TABC to obtain the bond. The principal is also responsible for keeping the bond renewed and in good standing and responsible for settling any claims filed against the bond.
  • The Obligee - The obligee is the TABC. The obligee outlines the bond requirements and also has the right to file a claim for damages against the bond if the principal doesn't meet those obligations.
  • The Surety - The surety is the company that issues the bond and covers the cost of claims. When the surety pays, the principal must pay that debt back with interest and potentially feeds added to the total.

How much does a Conduct Surety Bond cost?

Rates for bonds vary widely. The premium rates are determined based on various factors which include credit and financial standing. Typically, the poorer the credit, the higher the quotes are. The best way to get a truly accurate quote for a conduct surety bond is to apply for the bond and let the underwriter review the request and put a quote together. Viking Bond Service, Inc. will always attempt to get the best rate for the request. In instances where the rate is high to start due to challenged credit, our renewal department can remarket the bond if there has been an improvement in credit and/or financial standing.

Can you get a Conduct Surety Bond with bad credit?

The best way to get a TABC conduct surety bond when you have a low credit score or something like bankruptcy on your record is to work with a top surety brokerage like Viking Bond Service. Since we work with multiple sureties, we can help you find one willing to work with your credit situation. You should expect to pay a higher rate. However, you shouldn't expect your credit situation to automatically disqualify you for a bond.

How long does a Conduct Surety Bond remain valid?

These bonds remain valid for 12 months, after which they stop providing coverage and must be renewed. If a business does not renew the bond, it jeopardizes its ability to continue selling alcohol. To renew your bond you will need to agree to another credit check. Based on changes to your credit score or standing over the previous year, your premium costs could go up or down annually.

How are claims handled for Conduct Surety Bonds?

The surety only agrees to settle valid claims. That's why they launch a thorough investigation before paying anything out. As long as the claim holds up under scrutiny, the surety guarantees to settle the full amount of the claim up to the total of the bond. The principal no longer owes money to the obligee, the TABC, but now they owe that same amount plus interest and investigation fees to the surety.

How to manage TABC Surety Bond costs

Business owners who need a conduct surety bond may also need other kinds of bonds on top of mandatory insurance coverage and other non-negotiable business expenses. These can add up fast. And if they are not managed and planned for carefully, they can put a business in jeopardy. With this in mind, here are several ways to keep TABC surety bond costs as low as possible.

  • Pick the Right Surety - Costs for the same type of surety bond can vary widely between surety companies. Choose one that offers competitive rates along with exemplary service.
  • Avoid Causing Claims - Depending on the type of TABC bond, claims can cost as much as $5,000 or $10,000 - which the bondholder has the legal liability to pay. Most businesses don't budget for those kinds of unplanned costs. Avoid that financial hit by doing everything necessary to prevent claims against the bond. The best practice is to put policies/systems in place to ensure consistent compliance.
  • Settle Claims Immediately - If there is a claim filed against the bond, the bondholder has the option to settle it themselves without involving the surety. This signals their willingness to take responsibility for their mistakes. It also avoids the interest and fees that accumulate when the surety pays. Maybe most important, the surety may decide to stop extending bond coverage after settling a claim for someone because they are seen as too high risk to continue. Losing bond coverage makes it illegal to conduct business. Having a record of causing bond claims makes it harder to find alternate coverage as well. Bond claims can be a huge business disruption, so it bears repeating: avoid claims at all costs.
  • Improve Credit - Underwriters at the surety examine the bond holder's credit every time they renew. The renewal price reflects changes in credit standing over the previous year: prices go down as credit scores go up and vice versa. Working to consistently improve credit leads to lower bond prices each year.

How to apply for a Conduct Surety Bond?

Contact us to go over your bond request. Our agents will be able to tell you exactly what may be required to get a good quote for your specific bond request. Then complete an application and send any required documentation. A financial statement is not always needed but may be required along with the application. An agent will let you know if a financial statement will benefit the quote.

Viking Bond Service - Serving all of Texas

Save yourself a lot of time and hassle. Instead of shopping around and applying with multiple companies, searching for the best terms, rely on Viking Bond Service to do the leg work for you. Take a few minutes to fill out our online application. Or do it later after you've got answers to all your questions. For more information, contact us through the form on this page or by calling 1-888-2-SURETY (1-888-278-7389).

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