Premium Rates, Fees, Collateral, and Indemnity Agreements
This domain tests money: how premium is set, which charges are legitimate, how collateral must be held, and how far an indemnity agreement reaches.
Premium
The premium is a filed rate - commonly ten percent of the penal sum under the approved schedule, subject to a minimum premium. It is earned when the bond is executed and accepted by the court. It is not negotiable, may not be rebated, and may not be split with an unlicensed person. Refunds arise only where the bond is not accepted, is vacated by order, or the premium was overcharged. Additional approved charges must be disclosed in writing and separately receipted; they cannot be used to exceed the rate.
Collateral
Collateral exists to protect against loss, not to generate income. It must be held for the indemnitor, segregated and safeguarded, itemized on a receipt, and returned when the bond is exonerated and obligations are satisfied, less documented losses. Real property requires a title search, an equity check, and a recorded lien; never accept more collateral than the exposure justifies.
Indemnity agreements
The indemnitor promises to reimburse the surety and agent for paid forfeitures, recovery costs, and expenses. It is typically joint and several. Explain the scope before signature, and enforce it through documented accounting and lawful process - not self-help.
Worked example
A $100,000 bond draws a $10,000 premium. The agent also demands $25,000 cash collateral but describes it as "part of the fee," then refuses to return it after exoneration. Reasoning: wrong twice. Collateral is returnable security, and the charge labeled a fee exceeds the filed rate.
Traps that cost marks
- Calling collateral a fee.
- Taking a vehicle as collateral without title or a recorded lien.
- Inventing "service charges" later and netting them against the return.