A Texas health spa bond is a surety bond required by the state of Texas to protect members of health spas for unearned membership dues in the event that the health spa closes or files bankruptcy. The bond serves as financial protection for consumers in the event that the health spa closes and the members have prepaid dues to be refunded.
A Texas Health Spa Bond is a three-party agreement between a principal, surety and obligee.
The principal pays the surety a bond premium and provides indemnity to the surety. In exchange, the surety issues a health spa bond on the principal’s behalf to the State of Texas. Under The Health Spa Act of Texas Occupations Code Title 3 Chapter 702, if a consumer suffers financial harm because of the health spa closing, a consumer can file a claim against the bond.
For the purposes of the bond, a closed facility means that the facility is no longer available to members, and that similar services are not made available to them within a ten mile radius. This means that a claim could be filed against the bond if a health spa relocates more than ten miles away.
Should a claim be filed, the Surety will investigate the claim and pay it, if necessary. The Surety can then seek reimbursement from the health spa under the indemnity agreement. Health spa owners should understand that these bonds are not insurance, and the owners are generally required to reimburse the surety for all claims paid.
A Texas Health spa bond protects the public. It is easier and faster to collect from a licensed and regulated surety bond company than seeking reimbursement from a health spa through litigation or bankruptcy proceedings.
All Health Spas in Texas are required to post a surety bond or alternative. Texas defines a health spa as:
The amount required for a Texas Health Club Bond depends on the total amount of prepaid memberships at the spa. The bond amount varies between a minimum amount of \$20,000 and a maximum amount of \$50,000. The amount can be determined on the table below:
Consumers should understand that the amount of the bond is the most the surety bond company will have to pay out, regardless of the number of claims, dollar amount of claims, or the number of years the bond company has written the health spa bond. This is referred to as the bond penalty. However, payment under the bond does not typically relieve the health spa from further liability.
Many Texas Health Spa Bonds can be purchased online instantly. A simple credit check of the owners is all that is required on amounts up to $50,000. Simply follow these easy steps:
Most applicants can complete the application process in a few minutes without ever speaking to someone. Of course, health spas can contact us anytime if you prefer to speak with a person, or if you need assistance.
The bond should be sent to:
Registrations Unit, P.O. Box 13193
Austin, Texas 78711-3193
Texas Health Club Bonds cost 1% of the bond amount for most applicants. For example, a $50,000 health spa bond would cost $500. A $25,000 health spa bond would cost $250. Keep in mind that the premium will be due each year that the bond is in place. Some bond companies do provide discounts to those wishing to purchase multiple years upfront. These discounts can be as high as 25% in some cases.
A Texas Health Spa Bond must be continuous in nature and in place as long as the health spa is operating in the state. The liability can be closed out on the earlier of:
The surety may cancel the bond by giving the Texas Secretary of State at least 60 days written notice. However, the surety will still be liable for claims subject to the time periods stated above.
Texas does allow a health spa to post security other than a surety bond to protect their customers. Texas also allows health spas to earn the interest off of the collateral posted. There are reasons why these alternatives may not be a good idea. Cash and borrowing is often better used to fund operations and growth. While the cost of these products may be similar to surety the opportunity costs usually outweigh the price. More can be read about alternatives by clicking on these images.
A health spa may apply to the state for an exception to either the surety bond or alternative requirement. In order to do so, the applicant must file a sworn application to the state. The following are requirements to an exception:
The health spa does not require, solicit or offer a plan or that requires a health spa consumer do ANY of the following:
The health spa submits a sworn statement every three years with the secretary of state stating that it has ALL of the following:
Any consumer that has been financially harmed by a health spa’s closing or relocating may file a claim against the surety bond. Damaged consumers should contact the Secretary of State and provide a copy of the contract with the health spa and proof of payment under the contract. Damages recoverable on the bond are limited to the actual financial loss. They will be rounded to the nearest whole month.
Claims must be filed no later than 90 days after the notice of closure or relocation is posted on the Secretary of State’s website. Claims filed after this timeframe may be rejected.
Should the surety bond or other security not be enough to satisfy all of the claims, the claims will be paid on a pro rata basis to all who filed claims.
Texas Health Spa Bonds are required to protect consumers in the state against the closing or relocating of the spa. Fortunately for spa owners, these bonds are easy to obtain and inexpensive. Most can be purchased online in minutes. Health spas can review our Surety Bond Guide for more information, including many frequently asked questions about surety bonds. Contact the bond experts at Axcess Surety today for all your health spa surety needs.
Axcess Surety is the premier provider of surety bonds nationally. We work individuals and businesses across the country to provide the best surety bond programs at the best price.
