What is an Outdoor Advertising Bond?
Outdoor advertising bonds are a subset of the broader license & permit bond category that must be filed with the government agency (city, county, or state) responsible for regulating advertising in the outdoor advertiser’s jurisdiction as a condition to conduct business for most outdoor advertisers, sign contractors, sign erectors and sign hangers . Many states handle outdoor advertising license & permit issuance directly, while others allow local municipalities to regulate and issue outdoor advertising licenses & permits.
Outdoor advertising license & permit 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 outdoor advertisement bond, will also be referred to as the “surety company” or the “bond company”. Outdoor advertisement bonds refer to the sign contractor as the Principal, the surety bond company as the Obligor and the government agency as the Obligee.
Why is an Outdoor Advertising Bond required?
Outdoor advertisers are required to purchase license & permit bonds by state and 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 sign contractor violating terms of a sign permit. The surety company provides the government a guarantee (the surety bond) that the agents, servants and employees of a licensed sign contractor will receive payment for financial damages due to a violation of the statutes and regulations pertaining to the sign contractor license or permit 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, outdoor advertisers 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.
Outdoor advertising license & permit bond violations triggering a bond payout may include a sign contractor failing to pay necessary permit fees, failing to adhere to building codes or plans while hanging or erecting a sign, or failure to provide maintenance to existing signs.
How much does an Outdoor Advertising Bond cost?
Outdoor advertising license & permit bonds generally cost between .5% and 1% of the bond amount with a minimum premium of $100.
Example: $10,000 Outdoor Advertising Bond Cost
| Credit Score | Premium Rate | Bond Cost |
|---|---|---|
| Not Required | 1% | $100 |
Is a Credit Check Required for Outdoor Advertising Bonds?
Credit checks are not required for outdoor advertising license & permit bonds.
How does the wording in the bond form impact the cost of a Outdoor Advertising Bond?
The bond form is a tri-party agreement which defines the rights and obligations of the government agency (obligee), surety company (obligor) and sign 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 contractor via higher bond premiums, stricter underwriting or collateral. The primary text to consider in an outdoor advertising 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 $15,000 sign contractor 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. Outdoor advertising 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 sign 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 sign contractor failing to pay premiums due, claim payouts, or material changes in the contractor’s credit score. Outdoor advertisement 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”). Outdoor advertisement bonds with forfeiture clauses will be more expensive than a bond with similar coverage that does not contain the clause.