When a Tennessee lottery bond is required, it’s because TELC is concerned about the level of financial responsibility of an applicant for a lottery retailer license. The bond provides a measure of financial protection for TELC and the public by 1) requiring the retailer (the bond’s “principal”) to operate in full compliance with state laws and TELC regulations, and 2) giving TELC and members of the public the ability to file a claim for damages when the principal commits a violation that results in a financial loss by the injured party.
How to Get a Lottery Retailer License in Tennessee
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 Tennessee. 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?
All Tennessee retailers who wish to sell lottery products in their establishments must be properly licensed by the Tennessee Education Lottery Corporation, or TELC.
Why Is a Surety Bond Required?
How Do They Work?
There is a third party to a Tennessee lottery bond in addition to the obligee and the principal—the bond’s guarantor, referred to as the “surety.” The surety, in guaranteeing the bond, agrees to extend credit to the principal if necessary for the payment of claims. The surety also determines whether a given claim is valid and must be paid.
The usual practice is for the surety to pay a valid claim initially, which creates a debt that must be repaid by the principal, just as any other loan must be repaid. A principal who fails to repay the surety is likely to be sued by the surety to recover the claim amount.
What Are the Steps in the Licensing Process?
Before you can download the application packet for a Tennessee lottery retailer license, you’ll need to fill out the contact form on the TELC website. Submitting the completed contact form also will prompt a TELC sales team member to contact you and walk you through the licensing process.
TELC will send a representative out to speak with you at your retail location once you have submitted your completed application packet. Submission of your application packet also initiates background checks by TELC into your credit history, any criminal records, and your tax liability status.
Depending on the results of these background checks and TELC’s review of your application packet, you may be required to purchase a Tennessee lottery bond in an amount to be determined by TELC (the “obligee” requiring the bond”) based on your financial situation and the average sales volume of the licensed lottery retailers in your district.
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What Do They Cost?
The annual premium for a Tennessee lottery bond is the result of multiplying the required bond amount by the premium rate the surety assigns to the principal. The premium rate reflects how risky the underwriters believe it is for the surety to pay claims on the principal’s behalf in expectation of being repaid in full. The underwriters rely heavily on the principal’s personal credit score as a measure of that risk.
With a high credit score, the risk is considered to be low, which can result in a premium rate as low as 1%. A lower credit score is a red flag for higher risk and typically results in a substantially higher premium rate.
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How Do Tennessee Lottery Bonds Work?
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