What is a surplus lines broker bond?
A surplus lines broker bond is a license and permit bond that protects the state and other parties from insurance broker fraud. These bonds are three-party contracts between an insurance broker (principal), the state (obligee), and a surety company. Your state may require you to post this bond to work as a surplus lines broker.
What is a surplus lines broker?
By definition, a surplus lines broker is certified to place coverage with insurers that aren’t licensed (non-admitted) to do business in a specific state. In other words, surplus lines insurers can write coverage for clients in a particular state by working with a surplus lines broker in that state. Surplus lines brokers help businesses seeking high-risk coverage they can’t obtain via admitted (state-licensed) companies. This type of insurance coverage typically covers substandard and unusual risks. A surplus lines broker leads negotiations between insurance providers and customers. Due to the high-risk nature of this business, brokers must purchase a surplus lines broker bond to ensure they follow state and federal requirements.Get Your Surplus Lines Broker Bond:
Quick Takeaways
- A surplus lines broker bond is a license and permit bond that protects the state and clients from insurance broker fraud.
- If the broker breaks their bond contract and costs another party money, that party can file a claim on the bond for reimbursement.
- Various states may require surplus lines brokers to purchase and maintain a license and permit bond to conduct business.
How does a surplus lines broker bond work?
This surety bond protects the state and a broker’s clients by ensuring the broker abides by industry rules and regulations. If the broker breaks their bond contract and costs another party money, that party can file a claim on the bond for reimbursement. The surety may step in to cover the claim costs upfront, but the principal (broker) is ultimately responsible for paying for all damages in full.
Who needs this license and permit surety bond?
Various states may require surplus lines brokers to purchase and maintain a surety bond to conduct business, including:
- California
- Alabama
- Florida
- Georgia
- Ohio
- Maryland
- Rhode Island
- Kentucky
- Virginia
- Illinois
How much do surplus lines broker bonds cost?
You will pay a small percentage of the bond amount required in your state. Standard rates range from 1-5%. For example, if you live in California, you may need a $50,000 bond. If your rate is 2%, you could pay $1,000 annually. Your rate is based on your credit score, business finances, and other factors. If you have poor credit, you may still be able to get bonded at a higher rate (upwards of 10-15% of the bond amount).
Apply for Your Surplus Lines Broker Bond
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply today online or call us at 888.435.4191 to speak with an agent.
About ZipBonds.com
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.