Travel Agency Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about travel agency bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

What Are Travel Agency Bonds?

Travel agencies act as intermediaries between the traveling public and businesses that provide travel services, such as airlines, cruise lines, hotels, car rental agencies, tour guides, and so on. The travel agency collects deposits and other payments from customers and remits them to the appropriate travel services providers. There is the potential for mishandling or misappropriation of those funds, which is why some states require bonding of travel agencies.

A travel agency bond is the agency owner’s pledge to operate in compliance with all applicable state laws. That includes remitting customers’ funds to travel services businesses and paying all required taxes, fees, and fines owed to the state. Failure to live up to that pledge can cause financial harm to the state, to customers, or to travel services businesses. Any party incurring a loss because of the travel agency’s unlawful or unethical business conduct can file a claim for damages against the travel agency bond.

Who Needs Them?

Not all states require travel agency bonds—which are also known as “seller of travel” bonds. Those that do require them usually make purchasing the bond a mandatory step in travel agency licensing.

Each state (the “obligee” in a travel agency surety bond agreement) determines the required bond amount. This is also referred to as the bond’s “penal sum,” which is the most that will be paid out on a single claim. It typically is based on the agency’s dollar volume of business in the preceding 12 months or the prior calendar year.

The principal must have an active travel agency bond in force at all times in order to prevent suspension or revocation of the agency’s business license.

How Do They Work?

Any violation of the terms of the surety bond agreement by the travel agency (the bond’s “principal”) gives injured parties the right to file a claim for damages. Each claim is investigated by the third party to the agreement—the “surety,” the party that is guaranteeing the payment of claims. The surety determines whether a claim is valid and, although the principal is legally obligated to pay all valid claims, typically pays it on behalf of the principal and is subsequently repaid by the principal.

What Do They Cost?

The annual premium for a collection agency bond is a small percentage of the bond’s penal sum. That percentage, the premium rate, is set by the surety for each bond. The primary underwriting concern is the risk that the principal might not reimburse the surety in a timely manner for claims paid on the principal’s behalf. The premium rate must take this risk into account.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about travel agency bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE TRAVEL AGENCY BOND QUOTE

What Are Travel Agency Bonds?

Travel agencies act as intermediaries between the traveling public and businesses that provide travel services, such as airlines, cruise lines, hotels, car rental agencies, tour guides, and so on. The travel agency collects deposits and other payments from customers and remits them to the appropriate travel services providers. There is the potential for mishandling or misappropriation of those funds, which is why some states require bonding of travel agencies.

A travel agency bond is the agency owner’s pledge to operate in compliance with all applicable state laws. That includes remitting customers’ funds to travel services businesses and paying all required taxes, fees, and fines owed to the state. Failure to live up to that pledge can cause financial harm to the state, to customers, or to travel services businesses. Any party incurring a loss because of the travel agency’s unlawful or unethical business conduct can file a claim for damages against the travel agency bond.

Not all states require travel agency bonds—which are also known as “seller of travel” bonds. Those that do require them usually make purchasing the bond a mandatory step in travel agency licensing.

Each state (the “obligee” in a travel agency surety bond agreement) determines the required bond amount. This is also referred to as the bond’s “penal sum,” which is the most that will be paid out on a single claim. It typically is based on the agency’s dollar volume of business in the preceding 12 months or the prior calendar year.

The principal must have an active travel agency bond in force at all times in order to prevent suspension or revocation of the agency’s business license.

Any violation of the terms of the surety bond agreement by the travel agency (the bond’s “principal”) gives injured parties the right to file a claim for damages. Each claim is investigated by the third party to the agreement—the “surety,” the party that is guaranteeing the payment of claims. The surety determines whether a claim is valid and, although the principal is legally obligated to pay all valid claims, typically pays it on behalf of the principal and is subsequently repaid by the principal.

The annual premium for a collection agency bond is a small percentage of the bond’s penal sum. That percentage, the premium rate, is set by the surety for each bond. The primary underwriting concern is the risk that the principal might not reimburse the surety in a timely manner for claims paid on the principal’s behalf. The premium rate must take this risk into account.

The best measure of the principal’s creditworthiness is the individual’s personal credit score. With a strong credit history, the risk to the surety is considered to be low and deserving of a low premium rate—typically in the 1-3% range. A lower credit score is a sign of higher risk and warrants a higher premium rate.

REQUEST A QUOTE

Request a quote online or call today to speak with one of our surety bond experts about obtaining a travel agency bond.