Learn more about surplus lines bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Surplus Lines Bonds?
A surplus lines broker is an insurance broker licensed to place insurance policies with insurance carriers that are not licensed in the state. This typically happens when no in-state insurance company is willing to accept the amount of risk a given policy entails. The surplus lines broker acts as the liaison between a customer in one state and an insurance company licensed in another state. They negotiate premium rates and collect premiums, taxes, and fees on behalf of the insurance companies they represent.
A surplus lines bond (also known as a surplus lines agent bond) is a license and permit bond that surplus lines brokers need in order to operate legally within a particular state. The bond guarantees that the broker will abide by all applicable laws and provides protection for consumers against financial loss due to the broker’s unlawful or unethical actions.
Who Needs Them?
Each state has its own bond requirements. In some states, all surplus lines brokers are required to purchase their own bonds as individuals. In other states, they may be covered through a bond obtained by the firm they work for or represent.
How Do They Work?
Surplus lines brokers are not covered by the Insurance Guaranty Association, which protects the customers of insurance brokers that place policies with in-state insurance companies. A surplus lines bond provides similar protection for the customers of surplus lines brokers.
An offense such as failing to account for premium payments collected from a customer can result in a claim against the broker’s bond. The surety company will investigate the claim to ensure its validity before making payment to the claimant. The broker must then reimburse the surety company for the amount paid out on the claim.
What Do They Cost?
The premium a surety company will charge for the bond depends on the total bond amount and the bond premium rate assigned to the applicant. The bond amount varies widely from one state to the next, and the premium rate depends on the applicant’s personal credit and financial condition. Applicants with great credit can pay an annual premium from less than 1% of the bond amount to 2.5%. Applicants with poor credit will pay a much higher premium rate.
Use our convenient online system to apply for a surplus lines bond today!
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