• Consumers


  • Producers/Agents


  • Companies


In Lieu of Trusting

Letters of Credit

A Letter of Credit may be used in lieu of a Surety Bond, instead of establishing and maintaining a merchandise and services trust. The Letter of Credit, its form, and amount must be approved by the Commissioner prior to use. The Letter of Credit must be "evergreen," meaning it will not expire without an affirmative action by the issuer of the Letter of Credit. The amount of the initial Letter of Credit may not be less than the aggregate value of outstanding liabilities on undelivered preneed contracts of the Certificate Holder as of the end of its last fiscal year. For purposes of determining the amount of the Letter of Credit, "outstanding liabilities" means the original retail amount of services and cash advances and the actual cost to the Certificate Holder to provide the undelivered merchandise sold on each contract written after April 30, 2002. The Letter of Credit shall be in an amount sufficient to cover the outstanding liability at the time each contract is executed. After initial approval, the amount of the Letter of Credit shall be increased or decreased as necessary to correlate with changes in the outstanding liabilities for the previous calendar quarter and the projected liability for the immediately following quarter. The Commissioner may also approve the use of a Letter of Credit to cover a shortfall in the minimum required equity.

Surety Bonds

A Surety Bond may be used in lieu of establishing and maintaining a merchandise and services trust. The Surety Bond, its form, and amount must be approved by the Commissioner prior to use and written through an insurance company authorized to transact surety insurance in Alabama. The amount of the initial Surety Bond may not be less than the aggregate value of outstanding liabilities on undelivered preneed contracts of the Certificate Holder as of the end of its last fiscal year. For purposes of determining the amount of the Surety Bond, "outstanding liabilities" means the original retail amount of services and cash advances and the actual cost to the certificate holder to provide the undelivered merchandise sold on each contract written after April 30, 2002. The Surety Bond shall be in an amount sufficient to cover the outstanding liability at the time each contract is executed. After initial approval, the amount of the bond shall be increased or decreased as necessary to correlate with changes in the outstanding liabilities for the previous calendar quarter and the projected liability for the immediately following quarter. The Commissioner may also approve the use of a Surety Bond to cover a shortfall in the minimum required equity.

The above samples are for informational purposes only and do not replace the advice of an attorney. The Department of Insurance cannot provide legal advice nor make any representation that the sample documents are correct, complete or up-to-date. The Department of Insurance is not responsible for any loss, injury, claim, liability, or damage related to your use of these sample documents.