What is a Surplus Lines Broker Bond?
A surplus lines broker bond is a type of license and permit surety bond with the goal of protecting the state and other parties involved from any potential fraudulent activity by an insurance broker.
Numerous states require insurance brokers to obtain a surplus lines broker bond before they are authorized to offer surplus lines to customers. Just like any other surety bond, surplus lines broker bonds serve as a contract among three parties:
- The principal is the insurance broker required to be bonded.
- The obligee is the state authority imposing the bond requirement.
- The surety is the entity underwriting the bond and backing up your company financially.
How Do Surplus Lines Broker Bonds Work?
In the case of the surplus lines broker bond, you should be familiar with the following terms:
- surplus lines insurance— granted by an issuer who is not in the same state as the risk
- surplus lines broker— the person who leads the negotiations between the customer and issuer
- surplus lines broker bond— a license and permit bond required before being able to sell surplus lines insurance
If the broker fails to conduct business according to the terms of the surety bond contract, the bond protects harmed parties from financial loss up to the full bond amount. The principal must pay the surety back for all damages paid out.
State Specific Costs
The bond amounts and regulations surrounding each license are established on the state level. Thus, the costs and requirements of surplus lines broker bonds vary greatly across all states.
For example, the California Producer Licensing Bureau requires surplus lines brokers to post $50,000 surety bonds, while special lines surplus brokers are required to post $10,000 bonds. In Ohio, the Licensing Division of the Ohio Department of Insurance requires surplus line brokers to post $25,000 surety bonds.
Select your state below for more information about surplus lines broker bonds in your area or call 1 (800) 308-4358 to speak with a surety expert.
Who Does the Surplus Lines Broker Bonds Apply to?
Insurance agents who wish to offer surplus lines among their list of services are required to post a surplus lines broker bond in several states.
Surplus lines broker surety bonds protect the consumer’s investment, which is especially the case in states where the Insurance Guaranty Association does not protect surplus lines policies. The bond works for the consumer in the event a company defaults and ensures agents will correctly report all amounts collected.
What are the Next Steps?
If you apply for your surplus lines broker bond today, you will receive a free, no-obligation price quote within 24 business hours. SuretyBonds.com is licensed to issue surety bonds in all 50 states, which means we can be at your service no matter where your business is located. If you need the original bond form in your hands by tomorrow, we offer an overnight shipping option. Additionally, we sponsor a special bad credit bonding program for those who have experienced credit issues in the past.