California Residential Care Facility Bond

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California Residential Care Facility Bond: A Comprehensive Guide

This guide provides information for insurance agents to help their customers obtain a California Residential Care Facility Bond

At a Glance:

  • Lowest Cost: 1% of the bond amount per year based on the applicant’s credit
  • Bond Amount: Determined on a case by case basis (more on this later)
  • Who Needs it: California foster family homes/agencies, group homes, small family homes, and residential care facilities that hold resident funds in a trust account
  • Purpose: To ensure residents will receive compensation for any damages should the residential care facility mismanage their funds
  • Who Regulates Residential Care Facilities in California: The California Department of Health and Human Services
California Residential Care Facility Bond Form
California Residential Care Facility Bond Form

Background

California requires all residential care facilities operating in the state to obtain a license with the Department of Health and Human Services. The California legislature enacted the licensing laws and regulations to ensure that residential care facilities engage in ethical business practices. To provide financial security for the enforcement of the licensing law, residential care facilities that hold resident funds in a trust account must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the California Residential Care Facility Bond?

California requires all residential care facilities that hold resident funds in a trust account to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that residents will receive compensation for financial harm if the residential care facility fails to comply with the regulations set forth in the applicable licensing statute (there are multiple statutes that govern these licenses). Specifically, the bond protects residents in the event the care facility in any way mismanages resident funds. In short, the bond is a type of insurance that protects the public if the care facility acts unethically with resident funds.

How Can an Insurance Agent Obtain a California Residential Care Facility Surety Bond?

BondExchange makes obtaining a California Residential Care Facility surety bond easy. Simply log in to your account and use our keyword search to find the “residential” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

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How is the Bond Amount Determined?

California Health and Safety Code Sections 1560, 1568.021, and 1569.60 dictate that the limit on all Residential Care Facility bonds must be in an amount that reflects the total number of resident funds held in a trust account. Additionally, each statute specifies that the bond amount may not be less than $1,000.

Is a Credit Check Required for the California Residential Care Facility Bond?

Surety companies will run a credit check on the owners of the residential care facility to determine eligibility and pricing for the California Residential Care Facility Bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.

How Much Does the California Residential Care Facility Bond Cost?

The California Residential Care Facility Bond can cost anywhere between 1% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the bond cost on a $10,000 bond requirement.

$10,000 Residential Care Facility Bond Cost

Credit Score Bond Cost (1 year) Bond Cost (1 month)
800+ $100 $10
625 – 799 $150 $15
575 – 624 $366 $37
550 – 574 $500 $50
500 – 549 $750 $75

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

Who is Required to Purchase the Bond?

The California Department of Health and Human Services requires all foster family homes/agencies, group homes, small family group homes, and residential care facilities operating in the state to obtain a business license. To qualify for licensure, residential care facilities that handle funds of $50 or more per resident or $500 or more for all residents in any month must purchase and maintain a surety bond in an amount reflecting the total amount of resident funds held in a trust account, but not less than $1,000.

California Residential Care Facility Bond

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

How Do Residential Care Facilities Apply For a License in California?

Residential care facilities in California must navigate several steps to secure their licenses. Below are the general guidelines, but applicants should refer to the licensing statutes for details on the process.

License Period – All California Residential Care Facility Licenses expire annually and must be renewed before the expiration date

Step 1 – Complete Orientation

Applicants are required to register for and complete an orientation program. There are multiple orientations, and applicants must complete the one corresponding to the type of facility they operate.

Step 2 – Complete the Application

During orientation, the Department of Health and Human Services will go over the specific application process for each facility type. Additionally, the department will provide the applicant with all required application forms and documentation that must be completed prior to licensure. Applicants will need to complete a background check, and pay all required fees before being issued their license.

Step 3 – Purchase a Surety Bond

Applicants who hold resident funds in a trust account must purchase and maintain a surety bond, in an amount set by the Department of Health and Human Services, that reflects the total (estimated for first-time applicants) number of resident funds held.

How Do California Residential Care Facilities Renew Their License?

Prior to the license expiration date, the Department of Health and Human Services will contact the residential care facility with instructions on how to renew their license. All California Residential Care Facility Licenses expire annually and must be renewed before the expiration date.

What are the Insurance Requirements for Residential Care Facilities in California?

The Department of Health and Human Services does not require residential care facilities to purchase any form of liability insurance as a prerequisite to obtaining a business license. Applicants who hold resident funds in a trust account must purchase and maintain a surety bond, in an amount set by the Department of Health and Human Services, that reflects the total (estimated for first-time applicants) number of resident funds held.

How Do California Residential Care Facilities File Their Bond?

Residential care facilities should mail their completed bond form, including the power of attorney, to the following address:

Department of Social Services
Statewide Children’s Residential Program Office
744 P Street, T9-15-54
Sacramento, CA 95814

The surety bond requires signatures from both the surety company that issues the bond and from an owner/officer of the residential care facility. The surety company should include the following information on the bond form:

  • Legal name and address of entity/individual(s) buying the bond
  • Surety company’s name, address, and phone number
  • Bond amount
  • Date the bond goes into effect
  • Date the bond is signed

What Can California Residential Care Facilities Do to Avoid Claims Against Their Bonds?

To avoid claims on their bond, residential care facilities in California must adhere to the following provisions:

  • Hold all resident funds in a trust account
  • Do not mismanage resident funds
  • Payout all resident funds as requested

What Other Insurance Products Can Agents Offer Residential Care Facilities in California?

California does not require residential care facilities to purchase any form of liability insurance as a prerequisite to obtaining a business license. However, most reputable facilities will seek to obtain insurance coverage anyway. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for California Residential Care Facility Customers?

California conveniently provides a public database to search for licensed residential care facilities in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

California Residential Care Facility Bond