Businesses are required to file a bond with the Commonwealth of Kentucky Motor Vehicle Commission (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.
Kentucky Motor Vehicle Dealer and Wholesaler bonds typically cost between 1.0% and 9.0% of the bond amount depending on the personal credit, license history, and experience of the business owners and the surety carrier issuing the bond.
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.
Businesses are required to purchase and file a bond with the Commonwealth of Kentucky Motor Vehicle Commission 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.
Kentucky Motor Vehicle Dealer and Wholesaler bonds must be issued by an insurance carrier admitted by the Kentucky Department of Insurance. The insurance company issuing any surety bond, such as the Kentucky Motor Vehicle Dealer and Wholesaler 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 Commonwealth of Kentucky Motor Vehicle Commission 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.