What is a financially responsible officer bond?
Financially Responsible Officer Definition
Let’s start by defining a financially responsible officer, or FRO. An FRO is the primary person responsible for the financial aspects of a business (often the business owner). In certain states, you must obtain a surety bond to become a financially responsible officer.
FRO Bond Definition
An FRO bond is sometimes required as part of the FRO licensing process. It guarantees that officers follow all laws concerning their role.
- The bond protects the licensing authority by holding the FRO responsible for submitting the proper paperwork.
- It also protects the public by ensuring the FRO complies with industry standards and carries out their financial responsibilities lawfully and ethically. This includes tasks like accounting and recording for the business.
This type of financial guarantee bond ensures payment for a financial obligation.
Get Your FRO Bond:
- An FRO bond is sometimes required as part of the FRO licensing process. It guarantees that officers follow all laws concerning their role.
- A few states require this bond, including Kentucky, Florida, and Illinois.
- When setting your bond premium, your surety will consider various factors like your credit score, business finances, and assets and liquidity.
Who needs a financially responsible officer bond?
A few states require this bond, including Kentucky, Florida, and Illinois. It’s always wise to check with your state authority when applying for your license to determine whether you need a financially responsible officer bond.
For example, in Florida, construction company owners/officers responsible for the financial aspects of a business must become licensed and bonded. The State of Florida DBPR manages the licensing process.
- You can view their application checklist to ensure speedy processing.
- Your bond must be payable to the Construction Industry Licensing Board for $100,000.
How do FRO bonds work?
A financially responsible officer bond is a three-party contract between an obligee, a principal, and a surety. The obligee is the state licensing agency that requires the surety bond. The principal is the FRO, and the surety is the financial institution that issues and backs the bond.
By obtaining this bond, the FRO promises to abide by the law and industry regulations or pay the consequences. The bond guarantees the FRO will pay any applicable fees or fines and for any damages they may cause due to acting unethically or illegally on the job.
If someone files a claim on the FRO bond, the surety can immediately step in to cover the costs to settle the bond. However, the FRO must repay the surety in full, plus pay interest and fees.
How much does a financially responsible officer bond cost?
FRO bond costs can vary based on state requirements. You will pay a small percentage of the amount required as your bond premium each year. When setting your bond premium, your surety will consider various factors like your credit score, business finances, and assets and liquidity.
Let’s look at Florida again, which requires a $100,000 surety bond. If you have a high credit score, you may pay as little as 1% of that amount. If your credit score is lower, you could pay upwards of 5-10%.
Frequently Asked Questions
If someone files a claim on your bond, you can settle it yourself or allow your surety to resolve it for you. If you choose the latter option, you must repay your surety in full afterward.
You can typically avoid bond claims by following the law and carrying out your duties ethically. Bond claims can be costly and damage your reputation, affecting your ability to get licensed and bonded again, so it’s always best to avoid them.
You may still be able to get the bond you need if you have a low credit score. Expect to pay upwards of 5-10% if this is the case.
Apply for Your Financially Responsible Officer Bond
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to speak with an agent. We’ll help you get bonded in a zip!
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.