Learn more about insurance broker bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Insurance Broker Bonds?
The terminology used to describe professional roles in the insurance industry vary from state to state. Insurance broker bonds may also be referred to as insurance adjuster bonds, third party administrator bonds, or surplus line broker bonds. These are license and permit bonds that are required by many states as a condition of becoming licensed to do business in the state.
The purpose of these bonds is to protect consumers against financial loss due to the illegal acts of an insurance broker. The bond guarantees that the broker will conduct business in accordance with relevant state rules and regulations.
Who Needs Them?
Many states require applicants for licensing as an insurance broker to post a surety bond. Insurance brokers that operate in more than one state may need to be bonded in every state in which they are licensed. Those that operate in multiple locations within a state may need to obtain a separate bond for each location. And in some states, a bond is required for each individual working for an insurance broker as well as for the brokerage itself.
States that require insurance brokers to purchase a broker bond typically require that the bond remain in force in order to keep the broker’s license valid.
How Do They Work?
Purchasing an insurance broker surety bond is a pledge to comply with the law and operate in an ethical manner. That means refraining from such practices as manipulating the price of insurance, knowingly selling a consumer inappropriate coverages, approving applications containing information the broker knows to be fraudulent, and so on. A consumer who is harmed by the actions of an insurance broker can file a claim against the broker’s bond. The terms of each bond spell out the grounds for claims against the bond.
The surety company will investigate any claim against the bond and determine its validity before making payment up to the full amount of the bond. Operating a brokerage in a lawful and unethical manner is the best defense against claims. Be aware that you are ultimately responsible for reimbursing the surety company for the amount paid out on a claim.
What Do They Cost?
As with all surety bonds, the premium you pay is a small percentage of the full amount of the bond. This is typically in the range of one to five percent for applicants with good credit and the financial means to repay the surety any claims paid out against the bond. Applicants with poor credit will generally pay a higher premium rate.
Use our convenient online system to apply for an insurance broker bond today.
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