What Is a California Insurance Broker Bond?
The California insurance broker bond is an indispensable licensing requirement for insurance brokers in the state. Like many states across the U.S., California insurance professionals need to get the bond in order to practice their trade legally.
The California Department of Insurance’s Producer Licensing Bureau is the licensing authority that requires the bond. Its purpose is to guarantee that insurance brokers will follow all applicable rules, and most notably, the California Insurance Code. The insurance broker bond is also a tool that protects the interests of brokers’ customers in case of fraud and other misuse.
Your California insurance broker bond is a contract between three entities, just like other surety bonds. Your insurance business is the principal that needs to get the bond. The California Department of Insurance is the obligee that makes the bond obligatory. The surety is the third party that provides the bonding and backs your company.
Questions about Insurance Broker Bonds
Who needs to obtain a California insurance broker bond?
In California, it’s against the law to engage in insurance brokering without a proper license. All brokers must undergo the licensing process set by the Department of Insurance, and the bond is one of the main licensing requirements.
This bond ensures your compliance with state laws. Additionally, the bond is there to protect your customers from any potential fraudulent activities that you might engage in. These include improper handling of received funds, non-delivery of requested services, and any other unethical conduct in your dealings with insurance buyers.
How much does a California insurance broker bond cost?
The bond cost that you will need to pay is determined on the basis of the bond amount that you are required to obtain for your California insurance broker license. Currently, you need to post a $10,000 California insurance broker bond.
The bond amount is not the actual price of your bond. Instead, you need to cover only a bond premium, which is a few percentage points of it. If you fit the standard bonding market, your bond price is likely to be only 1%-5% of this amount.
How exactly is your bond cost determined? When you apply with a surety, it examines in detail your personal and business finances. The most important factors it considers include your personal credit score, business records, assets and liquidity, as well as professional experience. If these criteria are solid, you can expect a lower bond premium.
Our surety bond cost page offers a complete overview of how your surety bond cost is calculated.
|Bond Type||Surety Bond Amount||Credit Sore|
|Above 700||Between 650-699||Between 600-649||Below 599|
|California insurance broker bond||$10,000||$100||$100-$300||$250-$500||$500-$1,000|
Can I get a California insurance broker bond with bad credit?
Lance Surety Bonds operates its Bad Credit Surety Bonds program to assist insurance brokers with financial problems– such as low credit scores, tax liens, bankruptcies, or civil judgements– to get the bond they need.
If your finances are troubled, you can expect bond rates between 5%-10%. The higher bond cost compensates for the increased bonding risk. With us, you’ll still get a top bonding price. We work with a number of trusted A-rated, T-listed surety companies, so we can select the best matching bonding option for your case.
How do I get my California insurance broker bond?
Starting your bonding process is easy. Just apply online to get a free California insurance broker bond quote in no time. Once you submit your full profile, we’ll send you your exact bond price.
Need more information about the bonding process? Make sure to check out our How to Get Bonded page.
If you have any questions, you can call us at (877) 514-5146. Lance Surety Bonds’ experts are here to help.
What happens in case of a claim against my bond?
Your insurance broker bond works differently from insurance. It does not safeguard your interests, but rather your customers’. A claim can be made on the bond if you transgress state rules. This includes, among others, fraud, mismanagement of insurance funds, and unethical behavior towards your clients.
If the claim is proven, the affected parties can be awarded financial compensation. The reimbursement can be any amount up to the maximum penal sum of your bond. At first, it’s your surety that takes care of the costs. However, you are liable to repay it soon after. That’s why it’s imperative to avoid bond claims, since they can hurt your business financially and can be an obstacle for getting bonded in the future.