Kansas Private 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 Kansas Private School bond needs.
What Are Kansas Private School Bonds?
Kansas private school bonds (also known as proprietary school bonds) are specifically designed to ensure that if a private postsecondary school ceases operations, it will transfer all records of current and former students to the Board. This requirement ensures the ability to verify a student’s educational attainment (e.g., certificates or degrees, credits earned, etc.) even though the school attended is no longer in operation.
Who Needs Them?
The owners of private postsecondary schools offering instruction for business, trade, or occupational education and private degree-granting institutions are licensed by the Kansas Board of Regents. Every candidate for a new or renewal license (known as a certificate of approval) must provide the Board with a $20,000 surety bond as a mandatory step in the licensing process.
Every school subject to the bonding requirement must maintain an active Kansas private school bond at all times to prevent license suspension or revocation.
How Do They Work?
A Kansas private school bond is a legally binding contract involving three parties referred to as the obligee, the principal, and the surety. The Kansas Board of Regents is the obligee requiring the bond. The principal is the school owner required to furnish the bond. And the surety is the party guaranteeing the payment of valid claims against the bond.
The obligee can file a claim for damages if the principal fails to turn over student records upon ceasing operations. Although the surety guarantees the payment of claims, the terms of the surety bond agreement legally obligate the principal to pay them. The surety is indemnified against any legal responsibility for claims.
How Are Claims Paid?
Having guaranteed the bond, the surety typically will pay a legitimate claim initially, drawing against the $20,000 line of credit established for the principal at the time the bond was purchased. That payment, made on the principal’s behalf, creates a debt that the principal is legally obligated to repay to the surety. Failing to honor that debt can result in the surety taking legal action against the principal to recover the claim amount.
How Much Do They Cost?
The annual premium for a Kansas private school bond is a small percentage of the $20,000 bond amount. Exactly how large that percentage, the premium rate, will be depends on an underwriting assessment of the risk of the principal not repaying the surety as required. The primary measure of that risk is the principal’s personal credit score.
The underwriting assumption is that a principal with a history of acting in a financially responsible manner will continue to manage credit responsibly and will repay the surety according to the terms of the surety bond agreement.
A high credit score is a strong indication of low risk to the surety, which deserves a low premium rate. A principal with a lower credit score poses a greater risk, which must be offset by a higher premium rate.
The average well-qualified principal will pay a premium rate that’s in the range of one to three percent.
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