School Bus Bonds

Surety Bond Professionals is a family-owned and operated bonding company 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 school bus bond needs.

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What Are They?

More properly called “school bus contractor bonds,” these surety bonds guarantee that school bus companies under contract to a school board or school district will operate in compliance with all relevant laws and regulations. They also guarantee that a school bus contractor will do business in accordance with the contract awarded to the company for transporting students from their homes to school and home again. The purpose of a school bus bond is to protect the school district and families whose children ride the bus from financial loss due to the company’s actions.

Who Needs Them?

Some states have a statewide law requiring school bus contractors to purchase a surety bond, but in others, that requirement is established at the local school district level. Even when there is a statewide law, it’s the local school board and districts that sign contracts with school bus fleet operators or individual drivers to transport students to and from school (you’re considered a fleet operator if you provide two or more school buses for transporting students).

If you are going to be signing such a contract, you may very well be asked to purchase a school bus bond first. You’ll need to maintain a valid school bus bond at all times to avoid termination of the contract.

How Do They Work?

Every surety bond agreement is a legally binding contract that involves three parties, each of which have specific roles and responsibilities under the contract. In the case of a school bus bond, these are:

  • The obligee – the school board or school district requiring the bond. The obligee establishes the required bond amount (also known as the penal amount). They also establish the contract terms the principal must abide by to remain in compliance and avoid contract violations that can result in claims against the school bus bond.
  • The principal – the school bus fleet operator or driver purchasing the bond. The principal is legally obligated to pay all legitimate claims against the bond.
  • The surety – the company underwriting and issuing the bond. The surety investigates all claims to make sure that they are valid and tries to settle them if possible. An indemnification clause in every surety bond contract relieves the surety of any legal responsibility for paying claims.

If the principal violates the terms of the surety bond agreement, thereby causing someone to suffer a financial loss, that party has the right to file a claim against the principal’s school bus bond and be compensated for their loss.

When a claim is filed, the surety investigates to make sure the claim is valid and tries to negotiate a settlement. If the claim can’t be settled, typically the surety will pay it on behalf of the principal to give the principal time to move money or liquidate assets if needed. The principal reimburses the surety in full for the amount paid out on the claim.

What Do They Cost?

The annual premium for a school bus bond is a small percentage of the required bond amount set by the obligee. The surety determines what that percentage—the premium rate—will be based largely on the principal’s personal credit score. The higher the credit core, the lower the premium rate, and vice versa. Someone with great credit could pay a premium rate as low as 0.5 – 1%.

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