Texas Cigar and/or Tobacco Products Distributor Bond

Businesses are required to file a bond with the State of Texas Treasury Department (the "Obligee") to activate their license. The bond protects the Obligee by transferring to a surety bond company the cost of ensuring the public is compensated for damages resulting from a licensed business breaking licensing laws.

Cigar and/or Tobacco Products Distributor Bond

State/Jurisdiction:
Classification:

How much does the Texas Cigar and/or Tobacco Products Distributor bond cost?

Texas Cigar and/or Tobacco Products Distributor bonds typically cost between 1.5% and 5.0% of the bond amount depending on the personal credit, license history, and experience of the business owners and the surety carrier issuing the bond.

Credit Premium Rate
1.50%
2.00%
2.50%
4.00%
5.00%

Is a Credit Check Required for Texas Cigar and/or Tobacco Products Distributor Bonds?

Surety carriers will run a credit report as part of underwriting the bond because the business ultimately must reimburse the surety bond company for any claims made on the bond.

Why is the Texas Cigar and/or Tobacco Products Distributor bond required?

Businesses are required to purchase and file a bond with the State of Texas Treasury Department to activate their license. The bond protects the Obligee by transferring to a surety bond company the cost of ensuring the public is compensated for damages resulting from the failure of a licensed business complying with the provisions of licensing laws.

How does the Texas Cigar and/or Tobacco Products Distributor bond work?

Texas Cigar and/or Tobacco Products Distributor bonds must be issued by an insurance carrier admitted by the Texas Department of Insurance. The insurance company issuing any surety bond, such as the Texas Cigar and/or Tobacco Products Distributor bond, will also be referred to as the "surety company" or the "bond company". The business is referred to as the Principal, the surety bond company as the Obligor and the State of Texas Treasury Department as the Obligee.

The surety company provides the Obligee a guarantee (the surety bond) that the customers, vendors and employees of a licensed business will receive payment for financial damages due to a violation of licensing law up the bond amount stated on the bond form ("penal sum"). The bond company also directly receives claims from the public and determines the validity of claims. Ultimately, the licensed business owners are responsible for their actions and required by law to reimburse the surety company for any payments made under the bond or face indefinite license suspension.