California Insurance Broker Bond

In California, all insurance brokers must undergo the licensing process set by the Department of Insurance. It’s against the law to engage in insurance brokering without a proper license and the bond is one of the main licensing requirements. Article 5 of the California Insurance Code, sections 1662-1665, requires that insurance brokers file a surety bond with the state prior to obtaining their insurance license.

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.

We recently helped a new insurance brokerage firm in South California get their California insurance broker bond. Even though they knew their way around insurance, they were a bit puzzled by the bond requirements. We walked them through the application step by step, stressing the importance of financial integrity and how the bond would affect their business. By smoothing out the bonding process, we made sure the firm met the state’s bonding requirement quickly, so they could focus on their core business without any unnecessary delays.

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 state requires that these bonds have a two-year duration.

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 your credit score is high, your bond price is likely to be only 1% - 3% of this amount. For a $10,000 bond, you can expect to pay a premium between $100 and $300 for a period of 2 years.

How exactly is your bond cost determined? When you apply with a surety, it examines your personal and business finances in detail. 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.

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. 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.

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.

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.