Dealer Bonds Frequently Asked Questions
Q. What is the Florida Statute that regulates Auto Dealers?
A. The Statute is FS 320.27.
Q. What does the bond cover?
A. The coverage is extremely broad. The language required by the State includes: "Any agreement relating to the sale of a motor vehicle."
This includes wholesale and auction sales as well as retail sales.
Q. What are the requirements of Florida Department of Motor Vehicles to obtain a dealer License bond?
A. For the requirements: Click Here.
Q. What are the different types of bonds required?
A. For the different types of bonds required: Click Here.
Q. What is the dollar amount of the required Bond?
A. In Florida the amount of the bond required is $25,000
Q. What are the bonding company's underwriting requirements?
A. The Bonding company requires corporate indemnity, plus EITHER the owner(s)' personal indemnity OR profitable financial statements for last year-end and current month. (net worth must be a minmum of three times the bond amount).
Q. What is a surety bond?
A. A surety bond guarantees that a specific obligation will be met.
For example, a surety bond might guarantee that a construction project will be completed as outlined in the contract, or that a notary public will comply with the rules and regulations of the state in which he or she is licensed.
Q. Who are the parties to a surety bond?
A. There are three parties to a surety bond: the Principal, the Surety, and the Obligee.
The Principal is the individual or company that is being bonded.
The Surety is the insurance company which issues the bond and guarantees that the Principal will meet its obligations.
The Obligee is the party that the bond is protecting and to whom the Principal and Surety are obligated.
Q. How does the surety decide whether or not to issue a bond?
A. Surety companies carefully underwrite bond requests in order to be certain that the principal can meet the obligations required under the bond.
To do this, they look at the "3C's" - character, capacity, and capital.
This may involve analysis of corporate and personal financial statements, or obtaining business references in order to determine that the principal is capable of meeting the bonded obligation.
Since the Bonding company expects to repaid for any monies paid on behalf of the principal, a Bond is underwritten much like a "signature" or unsecured line of credit.
The extent to which the surety underwrites a bond request depends largely upon the nature of the bond obligation and the degree of risk involved.
Q. How is surety different from insurance?
A. A surety bond differs from insurance in that the surety bond provides protection to a third party. In addition, the principal on the surety bond must indemnify the surety company.
Q. What is an indemnity agreement?
A. The indemnity agreement is an agreement between the principal and the surety company in which the principal agrees to reimburse the surety for any losses paid out on their behalf.