What is a Third Party Administrator Bond?
Companies that administer services for other organizations or businesses are known as third party administrators. These companies may handle claims for an insurance business or manage benefits for employees on behalf of an employer. Third party administrators in many states are required to have a surety bond in place to comply with licensing guidelines.
A third party administrator bond guarantees that licensed businesses administering services for other companies comply with regulations and rules relevant to the industry in which they work. This type of surety bond also helps ensure a third party administrator properly manages funds as part of its obligation to the business it serves.
Third party administrator bonds involve three parties. The principal is the third party administrator required to secure a surety bond. The obligee is the authority requesting the bond as part of the licensing process. Finally, the surety company provides the bond to the principal. If a claim is made against a third party administrator bond, the surety pays the claim and the principal repays the amount. For this reason, it is essential to keep bond claims to a minimum.
What Does a Third Party Administrator Bond Cost?
A third party administrator bond is priced as a percentage of the total bond amount. The percentage rate ranges from 1 to 5% of the bond amount for most third party administrators. For a $50,000 third party administrator bond with a 2% rate, the premium is $1,000. Your rate is based on several factors, including your personal credit and business financials.
If your credit is not strong or your business finances do not show a strong track record of responsible management, the percentage of the total bond amount you pay is likely to be on the higher end of the range.
How Do I Get a Third Party Administrator Bond?
You can start the process of securing a third party administrator bond by submitting a brief quote request online.