North Carolina Prepaid Entertainment Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a North Carolina Prepaid Entertainment bond
At a Glance:
- Lowest Cost: $100 per year or $10 per month
- Bond Amount: Minimum of $10,000(more on this later)
- Who Needs it: Businesses that provide prepaid entertainment services (i.e. health clubs, social clubs, etc.) in North Carolina
- Purpose: To ensure consumers will receive compensation for financial harm if the business fails to provide services that have been paid for
- Who Regulates Prepaid Entertainment Businesses in North Carolina: The North Carolina Office of the Attorney General, Consumer Protection Division
Background
North Carolina Statute 66-124 requires businesses providing prepaid entertainment services to file a surety bond with the Attorney General’s Office before conducting business. The North Carolina legislature enacted the bonding requirement to ensure that these businesses provide consumers with all services that have been paid for. There is no statewide licensing requirement for prepaid entertainment businesses in North Carolina. However, businesses may need to obtain a local business or tax license.
What is the Purpose of the North Carolina Prepaid Entertainment Bond?
North Carolina requires prepaid entertainment businesses to purchase a surety as a prerequisite to conducting business. The bond ensures that consumers will receive compensation for financial harm if the business fails to comply with the regulations outlined in North Carolina Statute 66-124. Specifically, the bond protects consumers if the business closes down or ceases operations and does not provide refunds for services that have been paid for but not received. In short, the bond is a type of insurance that protects consumers if the business does not provide all services that have been paid for.
How Can an Insurance Agent Obtain a North Carolina Prepaid Entertainment Surety Bond?
BondExchange makes obtaining a North Carolina Prepaid Entertainment Bond easy. Simply login to your account and use our keyword search to find the “Entertainment” 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 (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 66-124 dictates that the bond amount must be equal to the aggregate amount of outstanding liabilities to buyers, or $10,000, whichever is greater. Think of it this way; a gym charges a yearly membership fee of $100 and requires members to pay in full on January 1 of each year. If the gym has 500 members, it would need to purchase a $50,000 surety bond as members will have paid for services yet to be received.
Is a Credit Check Required for the North Carolina Prepaid Entertainment Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the North Carolina Prepaid Entertainment bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants 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 applicant’s credit.
How Much Does the North Carolina Prepaid Entertainment Bond Cost?
The North Carolina Prepaid Entertainment Bond can cost anywhere between 1% to 7.5% of the bond amount per year. Insurance companies determine the rate based on several factors, including your customer’s credit score and experience. The chart below offers a quick reference for the cost of a $10,000 bond requirement.
$10,000 Prepaid Entertainment Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 680+ | $100 | $10 |
| 625 – 679 | $150 | $15 |
| 575 – 624 | $375 | $38 |
| 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?
North Carolina requires prepaid entertainment businesses to purchase a surety bond before conducting business. To paraphrase North Carolina Statute 66-118, a prepaid entertainment business is an organization that requires members to pay for services before receiving them. This definition applies to businesses that provide the following services:
- Dance lessons and facilities
- Matching, dating, or social club services or facilities
- Martial arts training
- Health or athletic club services or facilities
Nonprofits, schools, and state government agencies and programs are not considered to be prepaid entertainment businesses.
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.
Are Prepaid Entertainment Businesses Required to Obtain a License?
There is no statewide licensing requirement for prepaid entertainment businesses. However, these businesses may need to obtain a local business or tax license and should consult with their local municipal authority before beginning operations.
How do North Carolina Prepaid Entertainment Businesses File Their Bonds?
Prepaid entertainment businesses should mail their completed bond forms, including the power of attorney, to the following address:
9001 Mail Service Center
Raleigh, NC 27699-9001
The surety bond requires signatures from the surety company that issues the bond, the applicant, and a notary verifying the applicant’s signature. The surety company should include the following information on the bond form:
- Legal name, address, and state of incorporation of the entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Date the bond is signed
What Can North Carolina Prepaid Entertainment Businesses do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, prepaid entertainment businesses in North Carolina must ensure that they provide refunds to consumers for all services that have been paid for but not received.
What Other Insurance Products Can Agents Offer North Carolina Prepaid Entertainment Businesses?
Most reputable prepaid entertainment businesses will purchase liability insurance. 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 North Carolina Prepaid Entertainment Business Customers?
North Carolina unfortunately does not provide a public database of active prepaid entertainment businesses in the state. We suggest contacting the Attorney General’s Office to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.