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What Is Bail Bond Insurance and How Does It Work?

The sad truth is around 60% of people waiting for their trial remain in jail. They can post bail to get out, but they can’t afford it. This number includes innocent people.

Bail bond agents help these individuals get a taste of temporary liberty. They provide a guarantee to the court in place of posting bail.

A bond is a huge financial undertaking for the agent. For this reason, they need to work with a bail bond insurance company.

Do you want to become a bail bond agent? If so, learn more about bail bond insurance and how it works below.

What Is Bail Bond Insurance?

Bail bond agents offer protection for the court, but they need to protect themselves, too. To learn more about how this type of insurance works, let’s break down bail bonds first.

What Is a Bail Bond?

What happens if a defendant can’t afford the bail for their temporary freedom? They have the option to use a bail bond instead.

A bail bond serves as a guarantee to the court that the defendant will show up to every mandated court appearance. They must have an agent to act as an intermediary.

What Does a Bail Bond Agent Do?

A bondsman is a middleman between the court and the defendant. They post the bail bond. They’re responsible for the compensation if the other party doesn’t fulfill their promise.

What do they get in return? Before issuing a bond, the defendant must provide collateral and an upfront fee to the agent. It is usually a small percentage of the bail.

If the defendant fails to appear in court, the bondsman pays the bail. They use the collateral to cover it, so they don’t have to use their own money. In any case, the agent keeps the upfront fee paid by the defendant.

Nevertheless, a bail bond agent’s primary role isn’t to pay the court. It’s to recover the defendant and ensure they show up every time.

Why Does an Agent Need a Bond Insurance?

The court requires the bondsman to have enough assets to cover the bail should the defendant fail to show up to one of their court appearances. If you want to post a bond for more people, you have to build your wealth.

Some states also don’t allow bail agents to use their assets for their work. In South Carolina, an insurance company must appoint you before writing bail bonds.

If you’re an agent who wants to grow their business, you must get help from a bail bond insurance company. Partnering with one gives you other benefits, too.

The insurance company steps in if the agent can’t pay the court. As with any other type of insurance, they cover their client’s liability and compensate for the outstanding balance.

How Does an Agent Get Bail Bond Insurance?

You pay a premium to the insurance company depending on your financial status. They consider your credit rating, income stability, experience, and more.

You also have to set up a build-up fund (BUF) with the company. It serves as collateral, a guarantee that you’ll fulfill your obligations as stated in the contract. The amount in this account also plays a factor in your insurance rate.

If you fail to meet your obligations, the insurance company can use the BUF to pay recovery fees, legal fees, and judgments. Otherwise, the account makes for a nice retirement fund.

What Is a Surety Bond or Cash Bond?

You may have heard of people referring to a surety or cash bond in the same context. Are they the same? Let’s explore in more detail below.

Surety Bond

A bail bond is only a form of a surety bond. It’s a promise between three parties:

  • The principal
  • The obligee
  • The surety

The principal is the person with an obligation to meet. The obligee receives a guarantee they’ll get compensation if the other party fails to perform.

The surety is the issuer of the safety bond. They pay the compensation when a claim occurs, but the principal signs an agreement to reimburse them. They may not require collateral.

In the case of a bail bond, the principal is the defendant, while the obligee is the court. The surety is the agency.

The bond is a guarantee that the principal will show up to court. Otherwise, the agent has to pay the original amount of bail.

Other types of a surety bonds may work differently. However, the underlying process is the same. One difference is bail bonds always have collateral.

Cash Bond

What about a cash bond? It works the same in that it guarantees that the defendant will show up in court.

However, it doesn’t need an intermediary. It’s an agreement between only two parties – the court and the defendant.

A cash only bond requires the defendant to pay in full. It means paying an upfront fee for their liberty. Still, they promise to attend every scheduled court appearance.

If they fail to do so, they forfeit their right to claim the amount they paid. Cash bonds are refundable if the defendant shows up to court as ordered.

Any third party may provide the money needed for bail; it can be a friend or relative of the defendant. They take the risk of not getting their money back.

Before giving back the money, the court takes out any costs, fines, and fees for the current case. They can also deduct any monies owed for previous ones with outstanding balances.

Many courts often only accept cash as a form of payment. You can’t pay via checks, cashier checks, or other methods.

Become a Bail Bond Agent Now

People deciding to become bail bond agents must take on huge risks and responsibilities. That’s why they need bail bond insurance as protection.

Do you want to become a bail bond agent in South Carolina? If so, feel free to contact us today.