Precious metal and gem dealer bonds are legally binding agreements between three parties: precious metal and gem dealers, the government agency responsible for regulating local gem and precious metal dealers, and a surety company.
The government agency is the Obligee and establishes the obligations that the dealer (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the dealer.
Precious metal and gem dealer bonds are required in some states before being eligible to obtain a license to operate a business that buys or sells precious metals or gems. Some states where you need a surety bond include Oklahoma, New York, and Virginia.
When the surety company issues the bond, they provide the government agency a guarantee that the customers and suppliers of a licensed precious metal and gem dealer will receive payment for financial losses resulting from any violation of the statutes and regulations set forth by the government agency.
If the dealer fails to meet the obligations set out by the government agency, the surety will pay out any damages up to the bond amount. The dealer is ultimately liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
Precious metal and gem dealer surety bond costs vary depending on the total bond amount and the premium rate. The government agency sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for precious metal and gem dealer bonds typically cost between 1% and 5% of the total bond amount. Most precious metal and gem dealer bonds require credit checks. During the application process, the surety company evaluates your financial strength and industry experience. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a precious metal and gem dealer bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.