What Is a Kentucky Surplus Lines Broker Bond?
Surplus lines insurance brokers in Kentucky need to get a license from state authorities, permitting their legal operations. Among the main requirements you need to meet is to obtain a surplus lines broker bond, also referred to as a financial responsibility bond under Kentucky’s legislation.
As other surety bonds, this broker bond serves as a safety mechanism for the state and for brokers’ customers. It ensures your compliance with the Kentucky Insurance Code, as well as all other relevant laws.
Your surplus lines broker bond represents a three-party contract between your business, as the principal, and two more entities. The Kentucky Department of Insurance is the obligee that requires the bonding. The surety provides the bond.
Questions about Surplus Lines Broker Bonds in Kentucky
When do I have to post this bond?
As in most states, surplus lines insurance brokers are required to undergo a state licensing process. In Kentucky, the Department of Insurance requires you to get bonded as a part of the procedure. It sets the bonding amount on a case-by-case basis. The bond guarantees you will follow the Kentucky Insurance Code.
What is the cost of getting bonded?
The bond amount that you have to post as a Kentucky surplus lines insurance broker is set by the Department. To get bonded, you need to pay only a bond premium, which is a small percentage of the bond amount.
Your surety bond cost depends on a number of factors such as your personal credit score, company financials, and liquidity and assets. Your surety considers these factors to measure how risky it is to provide you with a bond. Applicants with solid finances get bond rates in the range of 1% to 5%.
Is it possible to get a Kentucky surplus lines broker bond with bad credit?
Lance Surety Bonds operates its Bad Credit Surety Bonds program for applicants with a low credit score, tax liens, bankruptcies, or civil judgements. If you are facing such issues, this option may be the right choice for you.
Since it presents a higher risk to provide bad credit bonds, the typical rates are slightly higher - between 5% to 10%. Still, we are able to find top bonding options for you due to our exclusive partnerships with a long list of A-rated, T-listed surety companies.
How do I apply for this bond?
Keen on learning more about the way bonding works? Don’t miss out our in-depth guide available on our How to Get Bonded page.
Lance Surety Bonds’ specialists are available to answer your questions and provide help with your bond application. You can reach us at (877) 514-5146.
What if I get a claim against my surety bond?
If you fail to follow your obligations under the Kentucky Insurance Code, you can end up with a claim against your bond. This is how harmed parties can seek a fair reimbursement for the damages that you have caused them with potential fraudulent or illegal actions.
The claims can be up to the penal sum of the bond, which is the amount you have posted. Your surety may cover the costs on proven cases, but this is only to provide a fast compensation. Then you have to fully repay it as set in the bond indemnity language. Thus, it is best to avoid situations that can lead to claims, which are costly and can seriously harm your business.