What types of bonds do auto dealers purchase?
Texas state law generally requires auto dealers to carry a surety bond of at least $50,000. This broadly applies to most new, used, franchised, independent, wholesale and other auto dealers. It also generally applies to motorcycle, house trailer, trailer and semi-trailer dealers, and some others.
The purpose of an auto dealer’s surety bond is to help protect customers against fraud, which is rare but has high costs given the prices of vehicles.
An insurance agent who specializes in bonds can help auto dealers, as well as other parties, procure the bond that’s right for them.
What types of bonds do individuals purchase?
Individual residents normally purchase bonds only if they have a legal obligation to another party, and most often the obligation is related to properly managing the other’s finances. These bonds are often called probate bonds, and there are different types:
- Executor Bond: Might guarantee the proper management of a deceased’s estate if they had a will.
- Administrator Bond: Might guarantee the proper management of a deceased’s estate if they didn’t have a will.
- Guardianship Bond: Might guarantee the proper management of an estate belonging to a legally incompetent adult or a minor.
- Conservatorship Bonds: Might guarantee the proper management of an estate belonging to a ward.
Again, a knowledgeable insurance agent can assist with these and other bonds if any are needed.
Who’s a party to a surety bond?
These bonds typically have three parties involved. The official terms for the various parties are:
- Surety: Party providing financial compensation (e.g. insurance company).
- Obligor: Party with an obligation to meet (e.g. auto dealer, fiduciary, contractor).
- Obligee: Party that something is done for (e.g. estate owner, customer).
The surety usually pays the obligee should the obligor fails to uphold their contracted responsibilities.