Delaware Private Business and Trade School Bonds

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Learn about private school bonds in Delaware and speak with an Single Source Insurance agent today about purchasing the private school bond you’ll need.

What Are Delaware Private Business and Trade School Bonds?

Delaware private business and trade school bonds are designed to protect students (and their parents or guardians) against the loss of tuition and fees paid to a private postsecondary school in this category in exchange for certain educational services. Failure to provide those services, which are enumerated in the student contract, entitles those who have prepaid tuition and fees to a refund.

A Delaware private business and trade school bond ensures that prepaid tuition and fees will be returned to those who paid them if the school does not voluntarily issue refunds.

Who Needs Delaware Private Business and Trade School Bonds?

To operate legally in the state of Delaware, every private postsecondary school offering business or occupational education must obtain a license (technically referred to as an operating certificate) from the Delaware Department of Education. Purchasing a surety bond to provide financial protection for students and their parents or guardians is a prerequisite for licensure.

As the “obligee” requiring the bond, the Department of Education sets the required bond amount on a case-by-case basis depending on each school’s gross tuition revenues.

How Do Delaware Private Business and Trade School Bonds Work?

The school’s owner, the party required to purchase the bond, is referred to as the “principal,” and is legally obligated to:

  • Abide by all applicable state laws and regulations governing private business and trade schools
  • Pay all valid claims for damages resulting from the principal’s failure to deliver all prepaid educational services

The third party to the bond known a the “surety” and serves as the bond’s guarantor. So, while the principal bears the legal obligation to pay valid claims, the surety guarantees that they are paid by making the payment initially.

The principal’s obligation then becomes an obligation to repay the surety for the resulting debt. The terms of the surety bond agreement indemnify the surety against any legal responsibility for claims, giving the surety the option of taking legal action against the principal if that’s what it takes to recover the amount of a claim paid on the principal’s behalf.

How Much Do Delaware Private Business and Trade School Bonds Cost?

The annual premium for a Delaware private business and trade school bond is the product of multiplying the required bond amount and the premium rate, which the surety assigns to the principal through underwriting.

That premium rate will reflect the underwriters’ conclusion about the risk that the principal might not repay the surety for claims paid by the surety on the principal’s behalf.  They rely on the principal’s personal credit score as a measure of that risk. A high credit score indicates a low risk level, and a low credit score is a red flag for higher risk. Low risk is rewarded with a low premium rate, and high risk warrants a higher one.

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