Whether you are new to auto industry or have been engaged working in this industry for decades, you must be aware that surety bonds are generally required as a part of the dealer licensing process. Dealer license and bond requirements are established by the obligee, which is usually a state’s Department of Motor Vehicles (DMV).
In order to apply for an auto dealer bond, the applicant must contact their state’s DMV and get all the essential information about the state’s current licensing requirements. Most states provide detailed checklist of licensing requirements to make the process easier. Individuals who are looking forward to get their motor vehicle dealer license usually have to provide a surety bond in order to guarantee that their dealership will comply with industry regulations. This type of license and permit bonds are generally known as auto dealer bonds, automobile bonds, car dealer bonds, DMV bonds, motor vehicle dealer bonds, etc.
The bond protects consumers from fraud and various other wrongful actions committed by dealerships and their employees. The key purpose of auto dealer bonds is to protect the consumers from damage due to fraud, defaulting on a contract or a wrongful behavior on the part of a business providing a service or product. Most of the time, a government agency requires a business to get bonded so as to get a license to provide their products or services. Sometimes, businesses themselves opt to get a surety bond to prove their commitment to ethical behavior.
Apart from the protection that consumer receives from an auto dealer bond; they also get a piece of mind knowing that a dealership has a surety bond in place. Getting an auto dealer surety bond usually means that a third party (Surety Company) has reviewed the financial standing of that particular dealership and authorized them as a financially stable company, assuring that the dealer is capable of paying for bond premiums and cost. In order to determine whether the dealership is financially stable or not, the surety company require dealers to provide their financial documentations and agree to submit to a credit check.
On the whole, the auto dealer bond assures that if something goes wrong during the transaction between consumer and dealership, the surety company will come into the picture to make the situation better for the consumer.
An ERISA fidelity bond is a kind of insurance that protects the plan against losses caused by acts of fraud or dishonesty. Below mentioned are certain frequently asked questions about ERISA fidelity bonds along with their answers, have a look:
Is ERISA Fidelity Bond and Fiduciary Liability Insurance are same?
No. The ERISA fidelity bond and Fiduciary liability insurance is not the same thing. The ERISA fidelity bond is specifically designed to insure a plan against losses due to fraud or dishonesty by people who are involved in handling plan funds or property. On the other hand, Fiduciary liability insurance insures fiduciaries and in some cases the plan against the losses caused by breaches of fiduciary responsibilities.
What parties are involved in an ERISA Fidelity Bond?
Generally two parties are involved in an ERISA fidelity bond-the plan is the name insured and a surety company that provides the bond. The people covered under this type of bond are the one who handle funds or other property of the plan. Being an insured party, the plan can make a claim on the bond if a plan official causes a loss to the plan due to fraud or dishonesty.
What is the required bonding amount?
A plan official must be bonded for a minimum of 10% of the amount of funds he or she handles. In most cases, the maximum bond amount that may be required under ERISA relating to any one plan official is around $500,000 per plan. Effective from January 1, 2008, the maximum required bond amount is $1,000,000 for plan officials of plans that hold employer securities.
Is it possible for a plan to purchase a bond for a larger amount?
Yes, a plan can buy a bond for a higher amount only in appropriate cases. It will be a fiduciary decision whether a plan should spend plan assets to buy a bond in an amount greater that that required by ERISA.
Is ERISA bonding requirements are mandatory for all employee benefit plans?
No, ERISA bonding requirements under ERISA section 412 do not apply to employee benefit plans that are entirely unfunded or that are not subject to Title I of ERISA.
What are the other exemptions from ERISA’s bonding?
The law and the Department’s regulations provide certain exemptions for some regulated financial institutions including certain insurance companies, banks and registered brokers and dealers.