Bonding Requirement Introduced for Personal Line Broker-Agents in California

Published: Dec 11, 2017
insurance broker bond



As of January 1, 2018, personal lines broker-agents in California need to meet new licensing requirements. If you want to offer personal insurance lines in the state, you will need to post an insurance broker bond as a part of your licensing.

The licensing criteria were changed with California Assembly Bill 1696, which was passed in October 2017. The goal of the stricter rules towards personal lines broker-agents is to ensure that their customers are duly protected. In case they don’t abide by the state law, affected customers can seek a financial compensation via a bond claim.

Let’s take a look at the main points in Assembly Bill 1696 that affect California personal lines broker-agents, as well as how to get bonded at the lowest cost.

What California Assembly Bill 1696 entails

California personal lines broker-agents

As of January 1, 2018, personal lines broker-agents in California will need to obtain a $10,000 insurance broker bond. The official bond form can be obtained online. This means that the same bond criteria will apply to them as to casualty and property broker-agents. The licensing authority is the state Department of Insurance

The bonding is an indispensable requirement for being allowed to operate in the state. It applies to both businesses and individual agents, as well as to both state and out-of-state brokers. Personal lines broker-agents will have to file the bond with the state Insurance Commissioner.

If at any point during your licensing period your bond becomes inactive, you will automatically lose your authority to work in the state. Respectively, every time you renew your state license, you also have to make sure your bond is renewed and is active.

Additional changes in the Bill that affect personal lines broker-agents, as well as other insurance brokers, refer to the license qualification examination you need to take prior to obtaining your license. Previously, if you had failed any 10 examinations within a 12-month period, you could not apply for another exam in the next 12 months. The new rules state that an applicant cannot sit more than 10 license qualification exams of the same type within 12 months.

If you already hold a property and casualty broker-agent license, you don’t have to apply for a personal lines license. The pre-licensing qualifications and requirements for personal lines broker-agents have been satisfied by covering the criteria for property and casualty broker-agents.

The bonding costs for personal lines broker-agents

The purpose of the bond requirement is to guarantee an extra level of security for the state and the customers of personal lines broker-agents. It also aims to improve the standards in the industry. But for agents, the bonding means additional licensing costs. How can you lower them?

The bond requirement in California is set at $10,000. However, this is not your actual bond cost. As with insurance, you only have to cover a premium to get bonded. It often constitutes 1% to 5% of the required bond amount. A simple calculation shows that your premium can be as low as $100 to $500.

The formation of the bond price depends on your personal and business finances. The most important factors are your credit score, company financials, assets and liquidity that you can showcase. Your surety examines how strong your profile is, and in this way, it assesses the level of the bonding risk. If you can demonstrate stable finances, you can expect a lower bond premium.


Still have questions about the new bond requirement for California personal lines broker-agents? Don’t hesitate to call us at 877.514.5146.

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Victor Lance is the founder and president of Lance Surety Bond Associates, Inc. He began his career as an officer in the U.S. Marine Corps, serving two combat tours. As president of Lance Surety, he now focuses on educating and assisting small businesses throughout the country with various license and bond requirements. Victor graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan's Ross School of Business.