Patient Trust 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 patient trust bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts today.

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What Are Patient Trust Bonds?

In every state, agencies with jurisdiction over nursing homes and similar long-term care facilities require those facilities to purchase patient trust bonds to protect the assets deposited by residents. Many residents receive funds from Social Security, pensions, family members, and other sources—funds that are to be held in trust to be used for the resident’s benefit, at the direction of the resident.

The patient trust bond purchased by a facility ensures that those funds are managed and accounted for properly. This provides protection for the facility’s residents against financial loss stemming from the unlawful or unethical actions of those responsible for managing the funds. Any malfeasance or negligence on the part of the facility that harms a resident financially gives the injured party the right to file a claim against the bond and be compensated for their loss.

Who Needs Them?

The Code of Federal Regulations (Section 483.10 (c)(7) obligates operators of long-term care facilities to safeguard residents’ assets, but the specific mechanisms through which that is done are up to the state.

Nearly all states mandate a surety bond, though some states call them Nursing Facility Resident Trust Fund bonds while others call them Skilled Care Facility bonds or something else. Purchasing one of these bonds is a mandatory step in the process of obtaining or renewing a facility license.

The required bond amount typically is $50,000. This is also known as the bond’s “penal sum,” which is the maximum amount that will be paid out on a single claim.

How Do They Work?

The patient trust bond agreement is a legally binding contract that brings together an “obligee,” a “principal,” and a “surety.”

  • The obligee is the state agency that licenses long-term care facilities.
  • The principal is the owner of the long-term care facility required to purchase the bond and legally obligated to pay all valid claims.
  • The surety is the company that guarantees the payment of claims.

Any violation of the terms of the surety bond agreement that causes a resident to incur a loss can result in a claim against a facility’s patient trust bond. The surety will verify that the claim is valid and perhaps will try to negotiate a settlement.

Absent a settlement, if the principal doesn’t pay the claim promptly, the surety will pay it on the principal’s behalf. But because the legal obligation to pay claims rests with the principal, the principal must repay the resulting debt to the surety.

What Do They Cost?

Extending credit to the principal by paying claims on the principal’s behalf is not without risk. The surety’s underwriters will look carefully at the principal’s credit history, which is a good indicator of the risk level. A principal with a high personal credit score is unlikely to avoid repaying the surety for claims paid in advance.

The rule of thumb is that a high credit score is rewarded with a low premium rate, potentially as low as one percent, and vice versa. A credit-challenged principal could pay a premium rate as high as ten percent, or even more.

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

CONTACT US FOR A

FREE PATIENT TRUST BOND QUOTE

What Are Patient Trust Bonds?

In every state, agencies with jurisdiction over nursing homes and similar long-term care facilities require those facilities to purchase patient trust bonds to protect the assets deposited by residents. Many residents receive funds from Social Security, pensions, family members, and other sources—funds that are to be held in trust to be used for the resident’s benefit, at the direction of the resident.

The patient trust bond purchased by a facility ensures that those funds are managed and accounted for properly. This provides protection for the facility’s residents against financial loss stemming from the unlawful or unethical actions of those responsible for managing the funds. Any malfeasance or negligence on the part of the facility that harms a resident financially gives the injured party the right to file a claim against the bond and be compensated for their loss.

The Code of Federal Regulations (Section 483.10 (c)(7) obligates operators of long-term care facilities to safeguard residents’ assets, but the specific mechanisms through which that is done are up to the state.

Nearly all states mandate a surety bond, though some states call them Nursing Facility Resident Trust Fund bonds while others call them Skilled Care Facility bonds or something else. Purchasing one of these bonds is a mandatory step in the process of obtaining or renewing a facility license.

The required bond amount typically is $50,000. This is also known as the bond’s “penal sum,” which is the maximum amount that will be paid out on a single claim.

The patient trust bond agreement is a legally binding contract that brings together an “obligee,” a “principal,” and a “surety.”

  • The obligee is the state agency that licenses long-term care facilities.
  • The principal is the owner of the long-term care facility required to purchase the bond and legally obligated to pay all valid claims.
  • The surety is the company that guarantees the payment of claims.

Any violation of the terms of the surety bond agreement that causes a resident to incur a loss can result in a claim against a facility’s patient trust bond. The surety will verify that the claim is valid and perhaps will try to negotiate a settlement.

Absent a settlement, if the principal doesn’t pay the claim promptly, the surety will pay it on the principal’s behalf. But because the legal obligation to pay claims rests with the principal, the principal must repay the resulting debt to the surety.

Extending credit to the principal by paying claims on the principal’s behalf is not without risk. The surety’s underwriters will look carefully at the principal’s credit history, which is a good indicator of the risk level. A principal with a high personal credit score is unlikely to avoid repaying the surety for claims paid in advance.

The rule of thumb is that a high credit score is rewarded with a low premium rate, potentially as low as one percent, and vice versa. A credit-challenged principal could pay a premium rate as high as ten percent, or even more.

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