A manufactured mobile home dealer bond is a type of surety bond that businesses or individuals who sell mobile or manufactured homes may be required to have. In some unique cases manufacturers and parts dealers also need to secure this specific type of surety bond. All states have varying regulations regarding manufactured mobile home dealer bonds.
Keep reading for more insight into what a manufactured mobile home dealer bond is, how this type of bond works, and how much they can cost.
As briefly noted before, a manufactured mobile home dealer bond is a type of surety bond. A manufactured mobile home dealer bond guarantees that the principal (aka the party that holds the bond) will operate in accordance with state laws and regulations. If the principal violates any laws, a consumer can make a claim against the manufactured mobile home dealer bond up to the maximum claim amount.
Many states require mobile or manufactured home dealers to have an active manufactured mobile home dealer bond with the hope that this will discourage unlawful behavior and that dealers will be held financially responsible if they break any rules or regulations.
Like other surety bonds, there are three main parties involved in a manufactured mobile home dealer bond. Knowing who these three parties are can make it much easier to understand how this type of surety bond works.
A principal. This is the manufactured mobile home dealer who is required to take out the surety bond.
An obligee. The obligee is the party who requires the principal obtain the manufactured mobile home dealer bond—this is often the state.
A surety. The surety is the guarantor of the manufactured mobile home dealer bond and is the one who underwriters it and sells it to the principal.
To better understand how a claim against a manufactured mobile home dealer bond can work, let’s look at an example. Let’s say a manufactured home dealer knowingly sells a faulty mobile home to a consumer and this leads the consumer to have to spend a lot of time and money resolving problems with their home. The buyer will have a right to file a claim against the manufactured mobile home dealer and the surety will have to investigate that claim. If the surety finds the customer’s claim is valid they will pay out a claim up to the maximum claim amount initially. The principal is not free and clear—they need to pay back the surety eventually and may even incur additional fees and fines on top of the claim amount.
In short—when a claim is filed against a manufactured mobile home dealer bond, the surety is obligated to investigate the claim and settle all valid claims. The surety will pay out the claim, but the principal must pay them back and the surety has the right to use whatever legal means necessary to collect the settlement amount, interest, and fees owed to them. If the principal can do so, it’s ideal to pay off the claim before the surety does to save money on interest in fees. Of course, avoiding the claim completely is the best way to not incur any unnecessary costs.
Usually, a manufactured mobile home dealer bond costs about 1% to 3% of the bonding capacity. What’s the bonding capacity? These terms will help you better understand how manufactured mobile home dealer bond pricing works.
Bonding capacity. The bonding capacity is the maximum amount a consumer can claim against the manufactured mobile home dealer bond. For example, if the bonding capacity is $30,000, then that’s the highest claim amount that can be paid out.
Bond premium. The bond premium represents how much the principal will spend to secure a manufactured mobile home dealer bond.
Bond term. The bond term is how long the manufactured mobile home dealer bond is active for.
The bond premium you’ll be offered by a surety varies based on a variety of different factors such as your personal and business credit score, your business history, and your businesses’ financial health. Your personal credit score plays the biggest factor in pricing and the better your credit score is, the better bond premium you’ll qualify for. If you can, try to improve your credit score before applying for a manufactured mobile home dealer bond to save as much money as possible on the bond premium.
Looking for a manufactured mobile home dealer bond? Get a free quote with Worldwide Insurance Specialists, Inc today!