What Is a Third Party Administrator Bond?
In a number of states, companies that administer services for another entity, such as handling claims for insurance companies or employee benefit claims, are required to post a third party administrator bond. The bond is required as a part of their licensing process.
The purpose of the bond is to guarantee that third party administrator will follow all applicable rules and regulations in its operations, and will properly handle all funds of the entity it serves.
Like other surety bonds, the third party administrator bond is a contractual agreement between three entities. Your business is the principal that needs to get the bond. The obligee is the authority that requires your bonding. The party that underwrites the bond is the surety.
Questions about Third Party Administrator Bond
Who needs to obtain a third party administrator bond?
Many states require third party administrator bond from companies that undertake administrative processes for another entity. Usually, the activities of such administrators are in the field of insurance claims and employee benefits.
When starting your third party administrator business, it’s best to inquire with relevant authorities as to the exact requirements that apply to you. You can find a list of some state’s requirements on the bottom of this page.
How much does a third party administrator bond cost?
Your bond cost is set on the basis of the bond amount that relevant state authorities require you to obtain. Whatever this bond amount may be, your bond premium is only a fraction of it. Typically, you’ll need to cover 1%-5% of the bond amount to obtain the bond.
Your third party administrator bond cost is determined by your personal and business finances. When you apply for the bond, your surety carefully examines your personal credit score, business records, and assets and liquidity. It may also consider your professional experience. On the basis of these factors, it determines whether your business is stable. You can expect a lower bond premium if you are deemed a low-risk applicant.
You can refer to our surety bond cost page for a full overview of how your bond price is set.
|State and Bond Name||Surety Bond Amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Louisiana third party administrator bond||$100,000||$750-1,500||$1,000-$2,500||$2,500-$5,000||$5,000-$10,000|
|Arkansas third party administrator bond||$25,000||$187-$735||$250-$625||$625-$1,250||$1,250-$2,500|
|Maryland and Utah third party administrator bond||Min. $5,000||$100||$100-$120||$125-$250||$250-$500|
|Iowa third party administrator bond||Min. $50,000||$375-$750||$500-$1,250||$1,250-$2,500||$2,500-$5,000|
|Texas third party administrator bond||Min. $10,000||$100-$150||$100-$250||$250-$500||$500-$1,000|
|South Carolina third party administrator bond||$75,000||$562-$1,125||$750-$1,875||$1,875-$3,750||$3,750-$7,500|
|Missouri third party administrator bond||$50,000||$375-$750||$500-$1,250||$1,250-$2,500||$2,500-$5,000|
|New Hampshire third party administrator bond||Min. $100,000||$750-$1,500||$1,000-$2,5000||$2,500-$5,000||$5,000-$10,000|
Can I get bonded with bad credit?
Getting your third party administrator bond with problematic finances can be tough. We offer our Bad Credit Surety Bonds program to help applicants with low credit scores, tax liens, bankruptcies, or civil judgements to get the bonds they need.
For bad credit bonding, the rates are in the range of 5%-10%. With Lance Surety Bonds you always get a top bonding rate for your situation. Because of our close partnerships with a number of A-rated, T-listed surety companies, we can select the best bonding option for your particular case.
How do I get my third party administrator bond?
To get started, you can apply online right away to receive your free bond quote. Your exact bond price is available once you submit a full application with all necessary paperwork.
If you would like to learn more about the bonding process, you can always refer to our How to Get Bonded page.
Need more help? Don’t hesitate to call us at (877) 514-5146. Our bonding specialists will be happy to assist you.
What happens if there’s a claim against my third party administrator bond?
Bonds work differently from insurance in that they protect your customers, not you. You can face a claim against your bond from an affected party if you break the rules. If the claim is valid, you will have to reimburse the claimant up to the penal sum of your bond. Initially your surety will cover the costs, but you will have to return all payments in full.
Claims are a serious threat for your business. They can prevent you from getting bonded in the future, and can harm your reputation as well. That’s why avoiding them is the best course of action.
Third party administrator bond state requirements
Louisiana third party administrator bond
The Louisiana Department of Insurance requires third party administrators to post a $100,000 bond.
Maryland third party administrator bond
Maryland third party administrators have to present a bond to the Maryland Insurance Administration. The amount depends on the average amount of money handled in the previous year, but should be between $5,000 and $500,000.
Utah third party administrator bond
Administrators in Utah have to post a bond with the Utah Insurance Department. The bond amount is between $5,000 and $500,000, depending on volume of money handled.
Arkansas third party administrator bond
Administrators in Arkansas need to post a $25,000 bond with the Arkansas Insurance Department.
Texas third party administrator bond
In Texas, administrators have to provide a bond to the Texas Department of Insurance. The bond amount should be between $10,000 and $500,000, depending on volume of work.
Iowa third party administrator bond
The Iowa Insurance Division requires administrators to post a bond in the amount of $50,000 to $1,000,000.
South Carolina third party administrator bond
The South Carolina Department of Insurance licenses administrators only after posting a $75,000 bond.
New Hampshire third party administrator bond
Administrators in New Hampshire have to post a bond with the New Hampshire Insurance Department. The bond amount should be between $100,000 to $1,000,000.
Missouri third party administrator bond
Missouri administrators have to post a $50,000 bond to the Missouri Department of Insurance, Financial Institutions and Professional Registration.