Overview of Third Party Administrator Bond Requirements
The third party administrator surety bond is a licensing requirement in several states, for businesses and individuals who wish to act as third party administrators. These businesses handle services for other entities, such as insurance companies, for which they may handle claims or parts of the claims process. Third party administrators also handle claims on employee benefit plans, including retirement plans.
Due to the sensitive nature of the cases they handle, third party administrators are often asked to get bonded, to guarantee their compliance with state statutes and regulations. The bond’s additional function is to extend compensation to vulnerable parties if an administrator should violate said statutes, and cause damages or losses to their clients. In such instances, a claim can be made against the bond, and compensation may be given to claimants for as much as the full penal sum of the bond.
To find out more about how surety bonds guarantee compensation, read our detailed ‘What is a surety bond’ guide.
Below, we have all the facts about the cost of the bond in numerous states, when bond claims may arise, and how to get your third party administrator bond with us.
If you have any questions regarding this bond, just call us at 866.450.3412 to speak to one of our agents. We will be happy to assist you.
Third Party Administrator Bond Cost
The cost of your bond depends on the amount of the bond you are required to obtain in the state you are getting licensed in. The amount of the bond– or the penal sum– varies from state to state, and so does the bond cost which is a fraction of the bond amount. For example, Louisiana requires applicants to obtain a $100,000 bond, while in Arkansas the bond amount is $25,000.
Bond cost is determined on the basis of your bond application. The bond application requires information such as your personal credit score, and other financial details in order for the surety to determine your bond rate. Typically the more information you provide, the more accurate a rate the surety can set.
Personal credit score is the most important factor. The higher an applicant’s score, the lower their rate. For some applicants this means that they can get bonded for as little as 0.75% of the amount of their bond.
See the table below for an overview of the possible cost of your bond in a number of states requiring the third party administrator bond.
|Bond Type||Surety Bond Amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Arkansas third party administrator bond||$25,000||$187 - $735||$250 - $625||$625 - $1,250||$1,250 - $2,500|
|Illinois third party administrator bond||Varies||N/A||N/A||N/A||N/A|
|Iowa third party administrator bond||Min. $50,000||$375-$750||$500 - $1,250||$1,250 - $2,500||$2,500 - $5,000|
|Max. $1,000,000||$7,500 - $15,000||$10,000 - $25,000||$25,000 - $50,000||$50,000 - $100,000|
|Louisiana third party administrator bond||$100,000||$750 - 1,500||$1,000 - $2,500||$2,500 - $5,000||$5,000 - $10,000|
Getting Bonded With Bad Credit
Applicants who don’t have a high credit score don’t need to worry about getting bonded. Thanks to our Bad Credit Program you can still get your bond, even if you have a low credit score, or no score at all.
To get bonded under this program, you’ll be asked to pay a higher rate– between 2% and 10% of the bond amount– due to the higher risk for sureties when bonding applicants with bad credit. The exact cost of your bond is determined by the surety once you apply, depending on your unique circumstances.
These are the same quality bonds that are issued at standard market rates. All bonds that we source for our customers are backed by some of the best sureties in this country, all of which are A-rated and T-listed companies.
Visit the bad credit program page to find out more about bonds under this program, and get in touch with us.
Claims Against Your Third Party Administrator Bond
When getting bonded, third party administrators agree to comply with all applicable state business rules and regulations. These are typically specified in the state Insurance Code or a similar statute.
The provisions typically inscribed in such statutes include that third party administrators must duly report and account for all the transactions they perform, maintain records of all agreements they have made with insurers, accept compensation only after they have performed services, and more.
When an administrator in some way violates these statutes through fraudulent behavior, those parties who have been harmed may file a claim against their bond. Depending on the gravity of the situation, a bond claim may result in compensations to claimants up to the full amount of the bond.
When compensation is paid out by the surety, the bonded third party administrator must repay the surety for its backing. Bond claims are lengthy and costly procedures, and are best avoided. The safest way for administrators to avoid a claim against their bond is to strictly comply with all requirements, and stick to the best practices in the industry.
Apply For Your Third Party Administrator Bond Now!
To apply for your third party administrator bond simply complete our surety bond application form. Once we process your form, we will contact you with a free quote. To complete your application, once you have your quote, you will need to provide us with a few more details.
After you apply, it will take approximately two working days to have your bond issued and on its way to you. As soon as we have your bond, we will send you a digital copy, and forward the original by mail.
Call us at 866.450.3412 to speak to our bond professionals and find out more about the third party administrator bond requirements in your state.