Reminder: Virginia Home Service Contract Providers Need Bonds as of 2018
Beginning on January 1, 2018, home service contract providers in Virginia will need to obtain a contractor license surety bond in order to legally operate in the state. This requirement was instituted at the end of April with the passing of Virginia House Bill 1542. Along with the bonding requirement, home service contract providers now have to comply with a series of new licensing requirements.
Previously home protection companies and home service contract providers were governed by the same rules. With the introduction of this bill, the latter now have separate licensing and bonding requirements they must comply with. Read on for a full overview of Bill’s provisions!
New Licensing Requirements
Under Chapter 33.1. Home Service Contract Providers of the Code of Virginia, starting January 1, 2018, home service contractors in Virginia will need to be licensed and bonded. Under the new rules, licenses will be issued at the Office of Charitable and Regulatory Programs (OCRP) which is part of the Department of Agriculture and Consumer Services (VDACS).
In order to get licensed, applicants will need to submit a completed application form to the Office. Along with that, an audited financial statement, a surety bond as well as a $300 registration fee will be required.
The financial statement, bond and fee will also need to be posted yearly upon renewing your license. Licenses are renewed annually on July 1, but renewal applications must be posted earlier. For more information about the bond requirement, see the next section.
Applicants who fail to register but still conduct business will need to pay a late filing fee of $100 for every 30 days in which their registration is late. A similar fee of $50 will be due for every 30 days in which a licensee has not renewed their license, once it has expired.
On the financial side, applicants are required to post a surety bond as well as to maintain a funded reserve account in order to get licensed. The funded reserve account must be equal to at least 40% of “gross consideration received, less claims paid, on the sale of the home service contract for all in-force home service contracts sold.”
Along with this account, applicants must post a surety bond, submit a letter of credit or, alternatively, post a liability insurance policy. Those applicants who opt for the surety bond must initially post a surety bond in the amount of $10,000.
This is the minimal surety bond amount, and it will be adjusted periodically by the Commissioner of Agriculture and Consumer Services on the basis of each licensee’s total amount of unexpired home service contracts.
The schedule for determining the bonding amount will be as follows. For a total amount:
- Between $50,001 to $300,000, a $40,000 bond will be required
- Between $300,001 to $750,000, a $65,000 bond will be due
- For $750,001 or more, a $90,000 bond will be necessary
The bond is conditioned upon the full compliance of the home service contract provider with the Virginia Code and in particular Chapter 33.1. Specifically, if a provider does not fulfill their obligations a home service contract, the bond is conditioned to be in favor of the persons who have purchased this contract from the provider.
When such a violation occurs, affected parties can file a claim against the bond, and request compensation for any damages or losses they have experienced.
But do home service contract providers need to pay the full bond amount in order to get bonded?
The cost of your bond is different from the bond amount. Unlike with other financial guarantee requirements which require bigger sums to be made available, to obtain a surety bond you only need to pay a premium.
How high or low that premium depends on your personal credit score, as well as other aspects of your personal financial status. Generally, the higher your score, the lower your bond rate – sometimes as low as 1% of the total bond amount.
If you want to know how much your bond will cost, submit a surety bond application, and we will provide you with a free and precise quote on your bond. There are no obligations attached to requesting a quote. If you have any questions about this bond or how to get bonded, call us at 877.514.5146!
Latest posts by Victor J. Lance, President/Owner (see all)
- How to Obtain a Title Insurance Agent License in Pennsylvania - August 19, 2019
- Your Succinct Ohio Mortgage Broker License Guide - August 14, 2019
- How to Get Your Title Insurance License in Maryland - August 14, 2019