What is an Adoption Facilitator Bond?
Adoption Facilitator bonds are a subset of the broader license bond category that must be filed with the government agency (city, county, or state) responsible for regulating the activity of matching prospective adoptive parents with birth parents as a condition for an adoption facilitator business to conduct such activity for a fee. California is currently the only state with such a requirement.
Adoption Facilitator bonds must be issued by insurance carriers admitted in the state where the government agency requiring the bond resides. The insurance carrier issuing any surety bond, such as an Adoption Facilitator bond, will also be referred to as the “surety company” or the “bond company”. Adoption Facilitator bonds refer to the facilitator as the Principal, the surety bond company as the Obligor and the government agency as the Obligee.
Why is an adoption facilitator bond required?
Adoption Facilitators are required to purchase license bonds per state statutes to protect a government agency by transferring to a surety bond company the cost of ensuring the public is compensated for damages resulting from an adoption facilitator breaking Family Code Laws. The surety company provides the government a guarantee (the surety bond) that adoptive parents and birth parents matched by an adoption facilitator will receive payment for damages due to a violation of the statutes and regulations pertaining to adoption facilitators up to a limit specified in the bond (“penal sum” or “bond amount”). The bond company also directly receives claims from the public and determines the validity of claims. Ultimately, adoption facilitators are responsible for their actions and required by law to reimburse the surety company for any payments made under the bond or face indefinite suspension of business activities.
Adoption Facilitator bond violations triggering a bond payout may include an adoption facilitator misrepresenting that they are a licensed adoption agency or failing to provide the service for which they have been paid.
How much does an adoption facilitator bond cost?
Adoption Facilitator bonds cost between 1% and 5% of the bond amount.
California $10,000 Adoption Facilitator Bond Cost
| Credit Score | Premium Rate | Bond Cost |
|---|---|---|
| 650 or above | 1.0% | $100 |
| 625-649 | 2% | $200 |
| 600-624 | 2.66% | $266 |
| 575 - 599 | 3.0% | $300 |
| 500-574 | 5.0% | $500 |
Is a Credit Check Required for Adoption Facilitator Bonds?
Credit checks are required for adoption facilitator bonds. Ultimately, the surety insurance company utilizes credit information to determine how it will underwrite and price a surety bond.
How does the wording in the bond form impact the cost of an Adoption Facilitator bond?
The bond form is a legal document, a tri-party agreement which defines the rights and obligations of the government agency (obligee), surety company (obligor) and contractor (principal). While many bond forms use similar language, each bond form can be customized by the government agency requiring the specific bond and may contain provisions that increase potential costs for the surety company, which will ultimately be passed on to the adoption facilitator via higher bond premiums, stricter underwriting or collateral. The primary text to consider in an adoption facilitator license bond surrounds (1) aggregate limits, (2) cancellation provisions and (3) forfeiture clauses.
Aggregate Limits
Bond forms always specify the penal sum defined as the maximum amount of financial damages any single party can recover from the bond related to a single claim occurrence. Most bond forms also contain a clause which limits the amount of financial damages from all parties and all claims to a specific amount (aggregate limit), usually the same amount as the penal sum. For example, a $10,000 adoption facilitator bond with an aggregate limit of $10,000 will pay out no more than $10,000, regardless of the number of damaged parties or claim occurrences. Adoption facilitator bonds without an aggregate limit will be more expensive than a bond with similar coverage containing an aggregate limit.
Cancellation Provisions
Most bonds contain a provision allowing for the surety company to cancel the bond (Cancellation Provision) by providing a notice to the contractor and government agency requiring the bond with the cancellation taking effect within a set period of time, usually 30 days (Cancellation Period). Cancellation provisions allow the surety company to cancel the bond for any reason, but most often due to the adoption facilitator failing to pay premiums due, claim payouts, or material changes in the adoption facilitator’s credit score. Adoption facilitator bonds with no cancellation provision or cancellation periods greater than 30 days will be more expensive than a bond with similar coverage containing a standard cancellation provision.
Forfeiture Clause
Surety bond claims are paid by surety companies to damaged parties to reimburse that party for the financial loss incurred up to the bond penalty amount. Certain bonds contain a clause which requires the surety company to pay the full bond penalty to the damaged party, regardless of the actual damages incurred (Forfeiture Clause). Adoption facilitator bonds with forfeiture clauses will be more expensive than a bond with similar coverage that does not contain the clause.