What is a Surplus Lines Broker Bond?
Several states require the surplus lines broker bond as a prerequisite for individuals to obtain a surplus lines broker license.
Surplus lines brokers are the middlemen between surplus lines insurers and customers. They negotiate surplus lines insurances on behalf of the customers, with insurers who are not licensed to do business in the state.
Since the Insurance Guaranty Association does not offer protection to insurance lines policies, this surety bond provides the necessary guaranties and protection for customers. It guarantees that bonded brokers will comply with state regulations and account for all payments they have collected.
If the lines broker is found to be in violation of regulations or to have acted dishonestly, a claim can be made against the bond. This is possible because the surplus lines broker bond is a three-way agreement between the broker (the bond principal), the customers and the state (the bond obligees), and the surety bond company which has issued the bond to the broker.
When a claim is made against the bond, the surety will investigate the claim and pay a compensation to the claimant if their claim is valid. The bonded broker will then have to repay the surety for its compensation to the obligee. That’s why surety bonds are often compared to a line of credit, which must be repaid once it has been extended. This is why claims can be costly to your business, and should be avoided at all times.
Learn more about the cost of surplus lines broker bonds below.
Surplus Lines Broker Bond Cost
Your surplus lines broker bond’s cost is a small percentage of the total amount of your bond, as determined by your state’s legislation. Amounts for these bonds vary between $10,000 in Maryland, and $50,000 in Arkansas, Alabama or Florida.
How high or low that percentage is depends on your financial status as an applicant. Personal credit has the greatest influence on your rate, but other factors, such as your financial statements and liquidity, are also important. Typically, the higher your credit– the lower your surety bond cost.
A high credit score translates into 0.75% - 2.5% of the total bond amount, which is the so-called standard market rate.
An additional factor that influences the cost of your bond is your choice of surety bond agency. Most people don’t know that surety bond agencies work with surety bond companies. But not all agencies work with the same companies.
Some, like Bryant Surety Bonds, work with A-rated and T-listed companies. Those are the companies that are recognized as being the best in the industry and the country. These companies can provide us with some of the lowest and most exclusive rates on the bonds we offer. By getting your bond with us, you know you’re getting bonded by a top surety company.
Learn all about bonding costs with our surety bond cost guide.
Bad Credit Bonds
Applicants with a bad credit score may wonder if they, too, can get bonded, given their less-than-perfect score.
Thanks to our Bad Credit Program these applicants can get bonded just as easily as everyone else, allowing them to continue doing business and improve their score over time.
Of course, rates under this program are slightly higher, because of the increased risk for sureties when bonding applicants with lower scores. While the exact cost under this program is determined on an individual basis, it is our policy to always look for the best deals for our clients, regardless of their credit score.
How to Get a Surplus Lines Broker License
To obtain a surplus lines broker license, you will typically need to apply at your state Department of Insurance. While all states differ somewhat in their application requirements for surplus lines brokers, you will typically need to submit an application, and cover some of the following requirements as well as include some or all of the following information:
- Your full name, address, contact information and social security number
- Your business’s entity name and trade names, address and contact information
- Submit a scan or copy of your fingerprints or a criminal background check
- Pass an educational pre-licensing course
- Pass one or several licensing examinations
- Submit a copy of your most recent annual statement
- Submit a surplus lines broker bond in the relevant amount
- Pay an application and/or licensing fee
Because not all of these requirements may apply to you, you should always ask your state’s Department for Insurance what you need to do in order to obtain your license.
How to Get Your Surplus Lines Broker Bond
Getting your surplus lines broker bond is simple: just fill in and submit our online surety bond application.
If you’d like to just get a free quote on your bond, you can still simply fill out the application. We will forward you your entirely free bond quote within a short amount of time.
If you have questions concerning the licensing or bonding requirements for surplus lines brokers in your state, our surety professionals can help! Call us at 866.450.3412 to speak to one of our experts and get more information or receive assistance. We look forward to hearing from you!