Among the many legal requirements and administrative steps that travel professionals need to meet, seller of travel bonds may be one on your list. Some states such as California, Virginia, Illinois, Florida and Iowa include the bonding as a part of the licensing or registration process for travel operators.
If you’ve never had to obtain surety bonds, it’s important to understand the purpose and application of such safety criteria. Seller of travel bonds are also known as travel agency bonds. They represent a guarantee for your business partners that your travel agency will transfer to them any due payments on bookings made via your company. As for your travel business, the bonds are a strong sign that you are safe to work with.
To get to know the bonding in detail, let’s look at how bonds work, what they mean for your travel business, and how much you need to pay for them.
What is a seller of travel bond
The seller of travel bonds are a type of surety bonds. Just like the rest of these security instruments, these bonds are required by state authorities that regulate the travel industry.
Travel agency bonds protect the individuals and entities that sell travel products via your business, as well as the customers your agency serves. They ensure that travel professionals will make all necessary payments on bookings they have taken for hotels, resorts, cruise lines and other travel services providers. In this sense, they safeguard the general public from fraud and any contract breaches committed by travel agencies.
In the unlikely event of such actions on the side of travel providers, the bond can be used to provide compensation to affected parties. This is done through filing a claim on the bond. For proven claims, the surety that has underwritten the bond covers the penalties at first. Your bonded travel business is then liable for all costs.
How seller of travel bonds work for your business
While the focus of travel agency bonds is to provide a safety net for your partners and customers, they also offer an added value for your own business. It’s useful to understand this aspect and apply it in your company’s interest.
While bonds don’t work like insurance for you, they are a powerful proof that your travel agency is legitimate and safe. In the larger context of the travel industry, bonds ensure that travel operators are held to high standards. This helps protect the image of the business and boost the trust that consumers have in travel professionals.
What is the bonding cost for your travel agency
The travel agency bond amount that you need to provide is set by the state authority that regulates the licensing. In Florida, travel agencies need to post a bond between $25,000 and $50,000 to the Florida Department of Agriculture and Consumer Services. Iowa travel professionals have to obtain a $10,000 bond and present it to the Secretary of State. In Washington State, the bond is between $10,000 and 50,000 and is required by the Washington State Department of Licensing.
In California, the bond amount is set on a case-by-case basis by the California Department of Justice. The same goes for Virginia, where the Department of Agriculture and Consumer Services determines the bond amount.
While the bond amount you need to provide to state authorities can be considerable, your bond price is only a few percentages of it. This is called your bond premium. It is assessed on the basis of your personal and business financials. The stronger your credit score and finances are, the lower the bond cost will be.
There are bond cost calculators that you can use to get an estimate of your bond price in advance. If your overall profile is stable, you can expect to pay between $100 and $300 for a $10,000 bond.
Obtaining a seller of travel bond is not only a state requirement that you might have to fulfill. Getting bonded can be beneficial for your own travel business because of the reputational boost that it gives. The bond also ensures that travel operators adhere to a high professional standard in serving customers, which improves the trust in the industry.
Do you have experience with getting a seller of travel bond? Please share your insights in the comments below.
Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping travel agencies get bonded and start their business.