Precious Metal Dealer Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Precious Metal Dealer bond.
What is a Precious Metal Dealer Bond?
Precious metal dealer bonds are government-required surety bonds that precious metal dealers must purchase before purchasing and selling precious metals to general public. Precious metal dealer bonds ensure that the public will receive compensation for financial harm if the dealer violates the terms of their license. Specifically, these bonds protect the public from financial harm if the precious metal dealer engages in acts of fraud or purchases/sells any stolen goods.
For example, if a precious metal dealer purchases any regulated metal property from a consumer that the dealer knows to be stolen, the rightful owner of the property can file a claim against the precious metal dealer’s bond to recoup their losses.
Many states and local governments require precious metal dealers to purchase a surety bond before obtaining a business license. The bond must remain active for as long as the dealer is in business. Unlike most insurance products, surety bonds protect a third party (consumers selling their precious metals) from acts that violate the law. When the surety company suffers a loss due to the precious metal dealer’s actions, the dealer must repay the surety company for any losses and sometimes court costs or other fees.
Who is Considered a “Precious Metal Dealer”?
Most states and local governments require precious metal dealers to apply for a license and purchase a surety bond as a prerequisite to obtaining a precious metal dealer license. State definitions vary on who is considered a “precious metal dealer”, but a precious metal dealer is generally defined as a person who purchases precious metals such as gold, silver, platinum, or palladium from the general public.
General exceptions to this definition include:
- Licensed pawnbrokers
- Retail merchants purchasing precious metals from manufacturers or wholesalers
- Retail merchants with a permanent place of business that acquire precious metals by trading their regularly sold merchandise as long as they do not provide the seller with money
Coin dealers and jewelry stores that purchase metals from the general public are common examples of businesses that would need a precious metal dealer license and bond.
Who Regulates Precious Metal Dealers?
State government agencies and local municipalities regulate precious metal dealers based on licensing laws written by state legislatures and city councils. Government agencies, commonly local police departments, enforce the law by instituting requirements such as a business license and/or permit, fingerprinting, background checks, and a surety bond. The surety bond ensures the public will be compensated if the precious metal dealer fails to comply with the law.
How Much Does a Precious Metal Dealer Bond Cost?
Depending on where the dealer is conducting business, a precious metal dealer bond can either cost a fixed rate (typically $100 per year) or a percentage of the bond amount paid annually. Most precious metal dealer bonds are typically considered low-risk, so surety companies will usually not run a credit check before issuing one. However, companies will run a credit check for higher-risk precious metal dealer bonds to determine eligibility and pricing.
For higher-risk bonds, precious metal dealers with good credit and business experience can expect to pay the lowest rates, while precious metal dealers with poor credit will pay higher rates. Below is an example of the cost of a $10,000 precious metal dealer bond with a credit requirement.
$10,000 Precious Metal Dealer Bond Cost
| Credit Score* | Bond Cost (1 Year) | Bond Cost (1 month) |
|---|---|---|
| 625+ | $100 | $10 |
| 600 – 624 | $250 | $25 |
| 575 – 599 | $300 | $30 |
| 550 – 574 | $500 | $50 |
| 500 – 549 | $700 | $70 |
*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.
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 Does a Precious Metal Dealer File Their Bond?
Surety bond companies will provide the precious metal dealer with a completed bond form to be filed with the relevant government agency. Most states and municipalities require the original bond with a raised surety company seal to be filed by mail or in person.
Surety companies should include the following information on most bond forms
- Legal name of the entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Name of the obligee and the license type being applied for
- Date the bond is signed and goes into effect
- Bond amount
- Power of Attorney
What Can Precious Metal Dealers Do to Avoid Claims on Their Bond?
To avoid claims on a precious metal dealer bond, precious metal dealers must adhere to all local and state regulations governing their license. Best practices for avoiding claims include the following:
- Do not engage in any acts of fraud
- Adhere to all consumer contracts
- Do not purchase or sell any stolen goods
- Maintain an accurate record of transactions
- Only conduct business with individuals aged 18 years or older
How Can an Insurance Agent Obtain a Precious Metal Dealer Surety Bond?
BondExchange makes obtaining a Precious Metal Dealer Bond easy. Simply login to your account, select the state the bond is needed in, and use our keyword search to find the “Precious Metal Dealer” 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 ensure 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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Which States Require Precious Metal Dealers to Purchase a Bond?
9 states either require precious metal dealers to purchase a bond or have municipalities that do. The following states and municipalities require precious metal dealers to purchase a surety bond:
| State | Bond Limit |
|---|---|
| Georgia | |
| Kentucky |
|
| Michigan |
|
| Minnesota |
|
| New Jersey |
|
| New York |
|
| North Carolina | $10,000 |
| Ohio | $10,000 |
| Oklahoma |
|
| Virginia |
|
What Other Insurance Products Can Agents Offer Precious Metal Dealers?
Certain municipalities require precious metal dealers to obtain liability insurance coverage against possible loss or damages of items resulting from fire, theft, and burglary. Precious metal dealers with employees will also need to purchase worker’s compensation insurance in some states. 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. Agents can access a list of brokers here.
