Surplus Lines Broker Bond

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Surplus Lines Broker Bond Information

To become a surplus lines broker you will need to get a license from your local government.

Getting this license you will undergo several background checks and criminal history check before being allowed to ‘set up shop.’ You will also be required to have a bond policy in place to be able to obtain the license. You may choose to self-bond your venture through a bank, but if you do not have the financial stability to be able to do this, you can purchase a bond from a broker.

The bond is not to protect the broker, but to protect others from any illegal practices or negligent acts that your business may engage in throughout the term of your license.

A surplus lines broker is an insurance agent that is able to sell policies to businesses and individuals that are not available in the state that they are licensed to practice in. If a Surplus lines broker were to sell a business an insurance policy that was not correct or legal to be in place in a certain area, any financial loss that the business may suffer can be quickly rectified by use of the bond arrangement.

It is important to know that a Surplus lines broker bond is not an insurance policy, but rather a way to access a lump sum of cash quickly should you be found to have committed any kind of fraud or negligence. After your bond broker repays any financial loss to the client, you will then need to reimburse the bond broker for the entire amount as well as any legal costs incurred.

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