Surplus Lines Broker Bond
If you are an insurance agent and want to offer surplus lines to your clients, you may be required to obtain a surplus lines broker bond first. This bond is also referred to as a surplus insurance broker bond or a surplus lines agent bond. Many states require this bond to ensure that any broker selling surplus lines follows all applicable laws and regulations to protect their clients' investments.
What is a Surplus Lines Broker Bond?
A surplus lines broker bond is a surety bond required before brokers can legally offer surplus lines to their clients. A bond is a risk-management tool that protects the broker's clients from potential broker fraud or incompetence. The surety bond establishes a financial incentive for the broker to abide by all relevant laws and regulations. It also creates a mechanism for clients to recover damages if they occur.
How Does a Surplus Insurance Broker Bond Work?
Surplus insurance broker bonds, like any type of surety bond, are legal contracts between three essential parties:
- The bond principal is the bonded insurance broker.
- The bond obligee is the government agency that requires the bond.
- The bond surety is the insurance company that underwrites the bond.
If a client alleges that their insurance broker caused them damages on a surplus line through fraud or incompetence, they can file a claim against the bond. The surety then thoroughly investigates the allegations. If the surety finds in the client's favor, they will pay the full damages up to the bond's total value. However, if the claim lacks merit, it will be dismissed.
Who Needs a Surplus Lines Broker Bond?
All resident and non-resident surplus line brokers and agencies must be bonded if their state regulations require it. Many states require these bonds, including Alabama, Arkansas, California, Florida, Georgia, Maryland, Rhode Island, and Virginia. If you are unsure whether you need a surplus lines broker bond, the surety experts at Viking Bond Service are here to help you figure it out.
How Much Does a Surplus Lines Broker Bond Cost?
Surplus lines broker bonds, like other surety bonds, cost a tiny fraction of the bond value. This value is established by the state(s) where you do business, and the required bond values may vary widely from one state to the next. The bond's premium typically ranges from 1-5% of the bond value, depending upon your credit score. Naturally, those with better credit pay a lower premium.
How Can I Get a Surplus Lines Agent Bond?
At Viking Bond Service, we strive to make it fast and hassle-free to obtain your surety bond. Please complete our online application today. We'll send you a competitive surplus lines broker surety bond quote ASAP. Contact us online or call 1-888-2-SURETY (1-888-278-7389). We're here to answer your questions!
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