North Carolina Lottery Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a North Carolina Lottery Bond
At a Glance:
- Lowest Cost: 1.5% 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: North Carolina lottery retailers who do not meet the North Carolina Education Lottery’s (NCEL) creditworthiness requirements
- Purpose: To ensure the public will receive compensation if the retailer fails to remit all funds owed to the NCEL
- Who Regulates Lottery Retailers in North Carolina: The North Carolina Education Lottery
Background
North Carolina statute 18C-141 requires all lottery retailers operating in the state to contract with the MLC prior to selling tickets. The North Carolina legislature enacted the contract laws and regulations to ensure that retailers engage in ethical business practices. To provide financial security for the enforcement of the contract provisions, retailers who do not meet the NCEL’s credit history requirements are required to purchase a surety bond in a minimum amount of $2,000 per retail location.
What is the Purpose of the North Carolina Lottery Bond?
The NCEL requires retailers who do not meet the required credit history standards to purchase a surety bond as part of the application process to obtain a retailer contract. The bond ensures that the public will receive compensation for financial harm if the retailer fails to comply with the regulations set forth in North Carolina statutes Chapter 18C. Specifically, the bond protects the public in the event the retailer fails to remit all funds owed to the NCEL. In short, the bond is a type of insurance that protects the public if the retailer violates the provisions of their contract.
How Can an Insurance Agent Obtain a North Carolina Lottery Bond?
BondExchange makes obtaining a North Carolina Lottery surety bond easy. Simply log in to your account and use our keyword search to find the “lottery” 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?
North Carolina statute 18C-143 grants the NCEL the authority to set the bond amount, on a case by case basis, to any amount that they choose. When determining a retailer’s bond amount, the NCEL will examine the retailer’s creditworthiness and expected sales. The bond must be a minimum of $2,000 per retail location.
Is a Credit Check Required for the North Carolina Lottery Bond?
Surety companies will run a credit check on the owners of the retail company to determine eligibility and pricing for the North Carolina Lottery bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit will likely 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 North Carolina Lottery Bond Cost?
The North Carolina Lottery surety bond can cost anywhere between 1.5% to 20% 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 approximate bond cost on a $10,000 bond requirement.
$10,000 Lottery Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $150 |
| 650 – 799 | $200 |
| 625 – 649 | $500 |
| 600 – 624 | $1,000 |
| 550 – 599 | $2,000 |
*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 a Bond?
The NCEL only requires retailers who do not meet the lottery’s creditworthiness requirements to purchase a surety bond. After the retailer submits their contract application, the NCEL will conduct a credit review to determine whether or not the retailer must purchase a surety 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 Retailers Apply for a Lottery Contract in North Carolina?
Lottery retailers in North Carolina must navigate several steps when applying for a retail contract. Below are the general guidelines, but applicants should refer to the application packet for details on the process.
Contract Period – All North Carolina Lottery Retail Contracts are valid for three years from the date of issuance and must be renewed before the expiration date
Step 1 – Open a Trust Account
Retailers must open a bank account designated as “In Trust for the North Carolina Education Lottery” and may be used solely for the deposit of lottery net proceeds
Step 2 – Complete the Application
All North Carolina Lottery Contract applications should be mailed to the following address:
North Carolina Education Lottery
Attn: Retailer Contracts Department
2728 Capital Blvd., Suite144
Raleigh, NC 27604
Retailers must complete the application in its entirety and must undergo a criminal background check. Additionally, retailers must ensure that they do not owe any state taxes and are up to date in filing their state tax returns. Retailers are required to pay a $75 application fee, plus an extra $10 per additional retail location.
Step 3 – Purchase a Surety Bond
After the retailer submits their application, the NCEL will conduct a credit check on the retailer to determine if they need a bond. If the retailer does need a bond, they must purchase one in an amount set forth by the NCEL. The bond amount must be a minimum of $2,000 per retail location.
Step 4 – Pass Inspection
The NCEL will conduct an on-site inspection of the retailer’s business location to ensure the retailer’s place of business is in compliance with the Americans with Disabilities Act.
How Do North Carolina Lottery Retailers Renew Their Contract?
Retailers should mail their completed renewal application, including all applicable fees, to the following address:
North Carolina Education Lottery
Attn: Retailer Contracts Department
2728 Capital Blvd., Suite144
Raleigh, NC 27604
All North Carolina Lottery Retail Contracts are valid for three years from the date of issuance and must be renewed before the expiration date. Retailers will have their credit history reevaluated to determine whether the retailer’s bond requirement should be waived or if one should be added.
What Are the Insurance Requirements for the North Carolina Lottery Contract?
North Carolina does not require retailers to obtain any form of liability insurance as a prerequisite to obtaining a lottery contract. Retailers who do not meet the NCEL’s creditworthiness requirements must purchase and maintain a surety bond with a minimum limit of $2,000 per retail location.
How Do North Carolina Lottery Retailers File Their Bond?
Retailers should mail their completed bond form, including the power of attorney, to the following address:
North Carolina Education Lottery
Attn: Retailer Contracts Department
2728 Capital Blvd., Suite144
Raleigh, NC 27604
The North Carolina Lottery surety bond requires signatures from both the surety company that issues the bond and a representative from the retail organization. The surety company should include the following information on the bond form:
- Legal name and 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 North Carolina Lottery Retailers Do to Avoid Claims Against Their Bond?
To avoid claims against their bond, lottery retailers in North Carolina must ensure that they remit all funds owed to the NCEL.
What Other Insurance Products Can Agents Offer Lottery Retailers in North Carolina?
North Carolina does not require lottery retailers to obtain any form of liability insurance as a prerequisite to obtaining a retailer license. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability 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 North Carolina Lottery Retailer Customers?
North Carolina conveniently provides a public database to search for active lottery retailers 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.