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California Surplus Lines Broker $50,000 Bond
The California Insurance Department requires a $50,000 California Surplus Lines Broker Bond from all surplus lines brokers doing business in the state. Both residents and nonresidents are required to pay the same amount of this bond. A surety bond for a surplus lines broker serves to assure that the broker will do business in accordance with the laws and regulations of the state. As a result, the bond contributes to the protection of the investments made by consumers.
In order to lawfully do business, surplus lines insurance brokers in California are required to get a state license, as is the case in the majority of states. One of the most important criteria is the procurement of a California Surplus Lines Broker Bond.
The provision of an additional layer of protection, both for the state and for your clientele, is the primary objective of the California Surplus Lines Broker Bond. It is an assurance that potentially damaged parties will be able to receive adequate compensation in the event that you fail to obey relevant state legislation.
Your California Surplus Lines Broker Bond functions in the same way as a contract would, with your insurance company serving as the principal and the other two companies being the parties to the agreement. The Department of Insurance in California is the obligee, meaning that they are the ones that demand the bond. A third person, known as the surety, is responsible for giving the bond.
Bonds for surplus line brokers and special lines brokers in the state of California continue in full force and effect until either the surety cancels the bond or the commissioner releases the surety from further obligation. Until one of these events occurs, the surety is not relieved from further duty. The surety has the ability to terminate the bond by providing the commissioner with a written notice of cancellation at least 30 days before the bond’s effective termination date.
Bond Amount
If you are a special lines broker, the bond amount that you are required to deposit is $10,000, and if you are a surplus lines broker, the bond amount is $50,000. You only need to pay a tiny proportion of the amount that you are required to give. This payment is known as the bond premium. Applicants that have solid financial standing often cover between 1 and 5 percent of the total bond amount.
When you apply with a surety, it is required to do a thorough investigation into both your personal and company finances in order to determine the degree of bonding risk. Your personal credit score, the financial health of your company, its liquidity and assets, and even your professional expertise are all taken into consideration. The more consistent these criteria are, the more probable it is that the price of your bond will be reduced.
Qualifications/Requirements
A person who arranges insurance with non-admitted insurers, covering risks other than aviation and some marine and transportation hazards is referred to as a surplus line broker according to the definition provided by the state of California.
You are needed to provide the following items in order to apply for a Surplus Lines Broker License in the state of California:
- If you are a person (either a resident or a non-resident) who will solely be dealing on behalf of a Surplus Lines Broker business entity, the following applies to you:
- Complete an Application for a Rapid Licensing Service.
- In order to endorse the individual surplus lines broker, the business entity has to fill out a Business Entity Endorsement form.
- Form LIC-050, Certification of Surplus Lines and/or Special Lines’ Surplus Lines, should be submitted.
- The licensing fee for a period of two years is $588.
- For persons who are merely doing business on behalf of a Surplus Lines Broker business firm, there is no need for them to post a bond.
- If you are an individual (either a resident or a non-resident) who is not trading on behalf of a Surplus Lines Broker business organization, the following applies to you:
- Complete an Application for a Rapid Licensing Service.
- Form LIC-050, Certification of Surplus Lines and/or Special Lines’ Surplus Lines, should be filled out and submitted.
- The licensing fee for a period of two years is $1,178.
- Form LIC 447-31 and a California Surplus Lines Broker Bond in the amount of $50,000, with the applicant’s name listed as the principal.
- If you are applying as a business entity, regardless of whether you are a resident or a non-resident of the United States:
- Complete a Fast Licensing Application Service (FLASH) form in the name of the natural person that is named on the company entity.
- Complete the application for the license to operate a business entity, which is form LIC 441-11.
- The licensing fee for a period of two years is $1,178.
- Form LIC 447-31 and a California Surplus Lines Broker Bond in the amount of $50,000, issued in the name of the corporate entity (signed by the natural person specified above), are both required.