Surplus Lines Broker Bonds

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Sureties are important in today’s world due to uncertainties about the current economic situation. While we would like to think the best of everyone, hard times can cause some people to default on contracts or payments. A surety bond guarantees payments will paid and that there will be compensation when guidelines not followed.

In some cases surety bonds protect both the vendor and consumer. Other bonds protect employees, such as janitorial bonds, and wages and welfare bonds

However, in many cases surety bonds protect the consumer, as in the case of the surplus lines broker bond.

How the bond works

As with all surety bonds, there are three parties involved with a surplus lines broker bond.Knowing these three parties is important to fully understanding how the bond works. In the case of the surplus lines broker bond, you need to be familiar with:

  • surplus lines insurance—granted by an insurer who is not in the same state as the risk
  • surplus lines broker—the person who negotiates between the customer and the insurer
  • surplus lines broker bond—a license and permit bond required to sell surplus lines insurance

As you can see, these three terms are intertwined quite closely. The bond guarantees that surplus line broker agents will act in accordance with laws. Surplus lines broker bonds work for the consumer and ensures that agents will report all amounts collected correctly.


A surety bond is important to consumers who purchase surplus lines insurance for the same reason all surety bonds are important: they protect the consumer’s investment.

Surplus lines broker bonds are especially important because in most states the Insurance Guaranty Association does not protect surplus lines policies. Therefore, claims would likely go unpaid if the insurance company becomes financially unstable. However, since surplus lines brokers are required to purchase a surplus lines broker bond, the consumer is protected in the event that the company defaults.

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