An Iowa lottery bond requires a lottery retailer (the “principal” purchasing the bond) to operate in compliance with ILA regulations detailed in the Iowa Statutes 99G.1-42. Any violation that results in monetary damages to ILA (the “obligee” requiring the bond) or to a member of the public gives the injured party the right to seek compensation by filing a claim against the bond.
How to Get a Lottery Retailer License in Iowa
At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about lottery retailer licensing in Iowa. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.
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Who Licenses Lottery Retailers?
The Iowa Lottery Authority (ILA) issues lottery retailer licenses in the state of Iowa. You must already have a business license and be operating a retail establishment before applying for a lottery retailer license.
Why Is a Surety Bond Required?
How Do They Work?
An Iowa lottery bond is a legally binding contract among three parties: the obligee, the principal, and a third party known as the surety. The surety is the party guaranteeing the bond. The terms of the surety bond agreement legally obligate the principle to pay all valid claims against the bond. However, the surety has guaranteed the payment of claims by agreeing to extend credit to the principal if necessary. It’s up to the surety to investigate and determine which claims are valid and must be paid.
What usually happens is that the surety will go ahead and make the initial payment of a claim, as a courtesy to the claimant and to expedite resolution of the matter. The principal must then repay that debt to the surety. The surety can take legal action if necessary to recover the amount of that debt from the principal.
What Are the Steps in the Licensing Process?
Lottery retailer license applications are submitted through the GovConnectIowa web portal, which can be accessed through the Iowa Lottery website, where you’ll find login instructions to get you started.
In addition to relying on the information contained in your completed electronic application, ILA will use the results of the background checks you authorize when you submit the completed application and $25 application fee. After reviewing your application, ILA will determine whether you meet the financial responsibility standards for licensing as a lottery retailer. If you fall short of expectations, you may be required to furnish ILA with a surety bond in an amount that ILA will establish on a case-by-case basis.
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What Do They Cost?
Like most surety bonds, an Iowa lottery bond is sold for an annual premium that is a small percentage of the bond amount required by the obligee. That percentage, the premium rate, is set on a case-by-case basis as a result of the surety’s underwriting process. The primary underwriting concern is the risk of the principal not repaying the surety for claims paid on the principal’s behalf.
The primary metric used by the underwriters is the principal’s personal credit score, which is a good indication of how responsibly the principal has managed credit and paid debts in the past. Someone with a high credit score is considered to present little risk to the surety, and therefore is assigned a low premium rate, perhaps as low as 1%. On the other hand, someone with a low credit score presents a higher risk level and receives a higher premium rate as a result.
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