What is a Bail Bond Agency Bond?
Bail Bond Agency license 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 bail bondsman activity in the bail bond agency’s jurisdiction as a condition for the bail bond agency to conduct business. Many states handle agency licensing directly, while others allow local municipalities to regulate and license bail bond agencies. Not to be confused with bail bonds, bail bond agency bonds are a licensing requirement for bail bond agents.
Bail agent 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 a bail bond agency bond, will also be referred to as the “surety company” or the “bond company”. Bail bond agency bonds refer to the bail agent as the Principal, the surety bond company as the Obligor and the government agency as the Obligee.
Why is a bail bond agency bond required?
Bail agents are required to purchase license bonds by state or local 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 a bail bond agency breaking insurance agency license law. The surety company provides the government a guarantee (the surety bond) that the customers of a licensed bail bond agency will receive payment for financial damages due to a violation of the statutes and regulations pertaining to the bail bond agency license 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, bail bond agencies 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.
Bail bond agency bond violations triggering a bond payout may include an agency failing to keep records, maintain a trust account or return collateral, as required, demonstrating conduct that indicates bad faith, dishonesty, or untrustworthiness, violation of an order to cease and desist, or performing the functions of a bail bondsman without proper licensing.
How much does a bail bond agency bond cost?
Bail Bond Agency bonds generally cost between 1.5% and 10% of the bond limit.
Example: $10,000 Bail Bond Agency Bond Cost
|Credit Score||Premium Rate||Bond Cost|
|680 and above||1.5%||$150|
|499 or below||10.0%||$1000|
The actual cost of a specific bail bond agency bond can vary widely depending on the risk associated with legal precedent in the jurisdiction, the language in the bond form and the bail bond agent's license history, experience and creditworthiness. Bail bond agency bonds required by a local government (city or county) tend to have the lowest cost, while state requirements have potentially higher costs and/or more strict underwriting requirements.
Is a Credit Check Required for Bail Bond Agency Bonds?
Credit checks are required for most bail bond agency bonds required by state agencies. Bail agent bonds required by cities, townships or counties with bond amounts under $25,000 generally do not require a credit check to purchase the bond. Ultimately, the surety insurance company determines how it will underwrite and price a surety bond.
How does the wording in the bond form impact the cost of a bail bond agency bond?
The bond form is a tri-party agreement which defines the rights and obligations of the government agency (obligee), surety company (obligor) and bail bond agency (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 bail bond agency via higher bond premiums, stricter underwriting or collateral. The primary text to consider in a bail bond agency bond surrounds (1) aggregate limits, (2) cancellation provisions and (3) forfeiture clauses.
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 $15,000 bail bond agency bond with an aggregate limit of $15,000 will pay out no more than $15,000, regardless of the number of damaged parties or claim occurrences. Bail bond agency bonds without an aggregate limit will be more expensive than a bond with similar coverage containing an aggregate limit.
Most bonds contain a provision allowing for the surety company to cancel the bond (“Cancellation Provision”) by providing a notice to the bail bond agency 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 bail bond agency failing to pay premiums due, claim payouts, or material changes in the bail bond agent’s credit score. Bail bond agency 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.
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”). Bail bond agency bonds with forfeiture clauses will be more expensive than a bond with similar coverage that does not contain the clause.