A health club bond is a surety bond required by certain state governments to obtain a business license for running a health club. It is sometimes referred to as a fitness center, spa, or gym bond, but its general purpose is the same. States will require the bond to protect consumers from financial losses or unethical/illegal business practices. It’s common for health clubs to collect monthly or annual membership fees upfront, so the health club bond is meant to protect the members if the club unexpectedly closes so that they can be refunded their membership fees.
Like any other surety bond, a health club bond is an agreement between three parties: the principal (the health club owner), the obligee (the entity requiring the bond, the state), and the surety company providing the bond. The bond guarantees that the principal will conduct their health club business according to the laws and regulations of the state. If the principal fails to run the business according to the state's regulations, such as not refunding membership fees if the gym closes, a claim can be filed against the bond. The amount required for a bond will depend on the state, but our $10,000 North Carolina Health Club bond prices start at $100.
The cost of a health club bond is called the premium. The premium will be a percentage of the total amount required for a bond. Each state will have different requirements for a health club bond, usually ranging from $10,000 to $50,000 but can be as high as $300,000. Some states, like West Virginia, have a flat amount required of $50,000 for a health club bond, while others, like Virginia, have a range of bond amounts from $10,000 for businesses with less than 250 contracts up to $300,000 if a business has multiple locations across the state. Every state will be different, so it’s best to confirm with the governing body for your state about the requirements for your business’s bond.
After the bond amount has been determined, the surety company will determine the percentage of the bond you will pay, the premium. The premium will usually be between 1% and 5% of the total bonded amount but can be as high as 10% for certain customers. The factors that will influence the premium are the applicant’s credit score, the business’s financials, and the experience level of the business. Of these factors, the credit score will significantly impact the premium due for a bond. Applicants with a high credit score will pay less for their bond than those with lower credit scores.
With that being said, applicants who have a low credit score can still receive an excellent rate for their bond because we’ve partnered with over 10 surety companies who each have their specialty within the industry. We have partners who are able to write bonds for customers with low or no credit scores when most companies will decline these customers. Our partnerships also enable us to offer the most competitive prices. Let us know if you find a better quote, and we’ll do our best to beat it!
Different states will classify a health club differently. Still, a general definition is a business that provides training, assistance, and/or facilities for maintaining or developing physical and personal wellness. This would include gyms, sports centers, tennis clubs, health spas, and martial arts schools. Since each state defines a health club differently, it’s best to check how your business is classified in your state.
A bond is different from insurance because the bond is meant to protect a third party, in this case, the gym’s members, and doesn’t offer coverage for the first party, the gym. Certain states require health club bonds to protect customers from illegal or unethical business practices common in the wellness industry. The main practice that the bond is meant to protect is if a gym were to go out of business after customers have paid monthly or annual fees, then the bond can cover the cost to refund customers for the membership they paid for but can no longer use.
Getting a health club bond is easy once you know the bonded amount required for your business. You’ll need the bond amount and information about your business, like the name, address, and owner's information, to get started. Once we’ve received this information, we can typically have a quote for our customers within the same day an application is submitted. Some factors impacting the quote time are the bond size, the applicant’s strength, and the underwriters at our surety partners. Rest assured, we have great partners who can issue a bond quickly!
Claims can be filed for many reasons on a health club bond. Most commonly, they are filed because a business went out of business and did not refund customers their membership fees. When this happens, a customer can file a claim to be refunded for their membership fees from the surety company.
If a claim is filed, the surety company will review it to determine its validity and value. If the claim is valid, the surety company will pay the claim amount to the affected party to reimburse them for the financial loss. The surety company will only pay up to the bonded amount for a claim, and once the claim is paid out, the surety company will recoup the claim amount from the principal. This is because a bond isn’t meant to protect the principal. It’s a form of protection for the obligee and the public, so if a claim happens, the surety company will request the principal pay them back. It’s important to repay the claim amount to the surety company to avoid any future issues with obtaining a new bond because of your claims history.