The Louisiana Department of Insurance requires certain licensees to carry a surety bond.
Each bond has to meet certain criteria in order to be acceptable.
What is a surety bond?
A surety bond is a written guarantee of payment, compliance or action among three different parties: the bondholder, the surety and the obligee. The bondholder is usually a business such as a construction contractor who buys the coverage. Contractors therefore agree to pay their subcontractors and suppliers, and they agree to follow local regulations. A surety (usually an insurance company) then signs onto the bond in an effort to secure it financially. The obligee is usually a local or state government agency that requires applicants to have a surety bond before they issue a business license or permit.
What does Louisiana require in a surety bond?
The Louisiana Department of Insurance specifies at least five requirements of doing business involving surety bonds. The insurer has to be in Louisiana, must use the legal form that LDI provides and must file the original bond with LDI. Each bond has to include a cancellation notice and must provide an annual continuance certificate before the expiration date.
How much coverage do I need?
The legislature specifies different insurance requirements depending on the type of industry. For example, property residual value insurers and vehicle mechanical breakdown insurers have to carry at least $150,000. Third-party administrators need to carry $100,000 while public adjusters need policies of $50,000. Inquire with a local legal expert as to which type of surety bond matches your industry.