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Everyone who sells lottery tickets or equipment for commercial purposes needs to obtain a lottery bond. This is a special surety bond that works as both license and permit bonds and financial guarantee bonds. It’s meant to protect the state and the public from the misdeeds of a lottery seller. Simply put, a lottery bond serves as a guarantee against mishandles of lottery funds. A seller of lottery tickets and equipment confirms in written form that all the industry regulations will be followed and consumers provided with a safe and fair lottery.
The basic principle of lottery bonds is simple. Just like any other surety bond, this one includes three parties in the agreement: a principal (the individual selling tickets or operating lottery equipment), an obligee (the entity that requires the bond, usually the state), and a surety (the organization that provides the guarantee).
The process behind the lottery bond is simple. A lottery seller obtains the bond as long as the business operates. If the seller violates state lottery rules, the state files a claim against the bond seeking financial reimbursement for the caused damage. If the claim turns out to be valid, the surety covers the expenses from the claim, and the principal pays out for the debt later on.
The price of a lottery bond is established on a state level for each license and can vary quite a bit. However, a lottery seller or a principal only needs to pay the percentage of the total bond amount, known as the bond premium. The lottery bond premium is determined by each particular surety but usually ranges between 1% and 5% of the total bond amount. The final rate will depend on the financial statement, credit score, and other similar factors.
Lottery bonds protect the public against fraud and dishonest behavior of entities that sell lottery tickets. However, they also protect the Lottery Commission in each particular state. Thus, the state or the government requires lottery bonds from anyone who sells lottery tickets and machines to ensure legal business performance. Along with guaranteeing proper handling of funds, lottery bonds also ensure a seller will pay all the state taxes.
Applying for a lottery bond is simple when you work with Bonding Solutions. Our online application is simple and can be completed in a matter of minutes. Once the application is received by our team, a dedicated account manager will reach out to you and begin the process of bond approval. The more accurate the information is that you provide, the faster our team will be able to approve the bond. We work with multiple markets which means we are able to find our clients the best rates available for lottery bonds. Connect with our team today to learn your options!Get Started