Idaho Proprietary School Bond

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Idaho Proprietary School Bond

Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Idaho proprietary school bond needs.


What Are Idaho Proprietary School Bonds?

Idaho proprietary school bonds are surety bonds designed to provide financial protection for the state of Idaho and for students (or parents) who have prepaid tuition and fees for specific educational services as described in the student contract. They obligate a proprietary school’s owner to operate in accordance with applicable Idaho statutes and regulations and to compensate any party financially harmed by the owner’s noncompliance.

This protection is especially important in the event a school ceases operations without refunding prepaid tuition and fees or “teaching out” its last class. 

Who Needs Them?

Idaho defines proprietary schools as non-degree granting privately owned postsecondary educational institutions. To operate a proprietary school anywhere in the state, the owner (the bond’s “principal”) must register the school with the State Board of Education (the bond’s “obligee”) and renew the registration annually. 

Purchasing an Idaho proprietary school bond and renewing it at each expiration is a prerequisite for maintaining an active registration. The required bond amount varies, as it is based on the school’s gross tuition collected during the prior year. 

How Do They Work?

An Idaho proprietary bond is a legally binding contract bringing together the obligee, the principal, and a third party, the bond’s guarantor (known as the “surety”). It legally obligates the principal to pay all valid claims against the bond. The surety is responsible for investigating each claim received and determining its legitimacy.

How Are Claims Paid?

Although the legal obligation to pay valid claims belongs solely to the principal, the surety has guaranteed their payment. Unless the principal pays a claim immediately or the surety negotiates a settlement, the surety will pay the claim. But that payment does not change the fact the claim is the obligation of the principal or that the surety is indemnified against any legal responsibility for it.

In paying a claim on behalf of the principal, the surety is extending credit to the principal, creating a debt that the principal must repay. Failing to repay that debt can result in the surety taking legal action against the principal to recover not only the claim amount but any court fees and legal costs as well.

How Much Do They Cost?

The annual premium for an Idaho proprietary school bond is calculated by multiplying two factors: the required bond amount established by the obligee and the premium rate set by the surety. The premium rate varies, depending on an underwriting assessment of the likelihood of claims and the risk of the principal not repaying the surety for claims paid on the principal’s behalf. 

The primary measure of risk is the principal’s personal credit score, which is evidence of how fiscally responsible the principal has been in the past. A high credit score is associated with low risk, typically resulting in a low premium rate. A lower credit score signals a higher risk level and warrants a higher premium rate to compensate for the greater risk to the surety.

The average well-qualified principal will pay a premium rate that’s in the range of one to three percent.

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Our surety bond professionals will get you the Idaho proprietary school bond you need at a competitive rate.